1. Commentary 2. Earnings 3. Current Trades & Closed Trades 4. Closing Thoughts ************************************************** 1. Commentary The market ended the week on a sour note after a disappointing jobs report gave the bears control heading into Monday’s opening bell. The news sent the Dow reeling 223 points, or 2.6%, and pushed the index below 8,300 as the Dow ended the week at 8,280. More importantly, the S&P 500 fell below the 900 level in the final half-hour of trading as it tanked 27 points, or 2.9%, to close at 896. The Nasdaq also folded like a cheap card table as it dropped nearly 50 points, or 2.7%, and settled at 1,796. It had already been a choppy week as the bulls and bears traded blows but Thursday’s action has left the bulls wobbly heading into 2Q earnings season. The unemployment rate now stands at 9.5%, a 25-year high, and came in below the 9.6% number Wall Street had expected. However, we all know unemployment is headed to 10% and so does Wall Street. There was some good news sprinkled in with the bad as May factory orders rose 1.2%, which beat a forecast that called for a 0.9% increase. The unemployment figures were released before the market opened on Thursday and we saw a slight bounce once factory numbers were released but that was it. The few remaining bulls that were standing tried to pick the market up but they too packed it in and headed out for the three-day weekend. The close though was not good and it remains to be seen just how much ground the bulls gave up last week. As usual, Alcoa (AA, $9.86, down $0.49) will be the first to announce earnings on Wednesday and Wall Street will be looking for clues as to which way the market could be headed. Alcoa has missed expectations and reported a wider-than expected loss for the past two quarters and another loss for the current quarter is being penciled in. Alcoa is expected to report a loss of 32 cents a share and the stock took a 5% dive on Thursday. In March, the stock hit a low of just under $5 a share and has been recently consolidating between $9-$12. Aluminum prices are still hurting so the key for Alcoa to surprise will be how effective their cost-cutting measures have been. The company doesn’t carry the weight it once did as far as getting a clear picture on the economy’s health but can still influence the market’s direction. ************************************************** 2. Earnings Monday: None worth mentioning… Tuesday: A. Schulman (SHLM, $15.66, down $0.11), Greenbrier Companies (GBX, $7.16, down $0.25), International Speedway (ISCA, $25.25, down $0.70) and Ruby Tuesday (RBT, $6.74, down $0.01). Wednesday: Alcoa (AA, $9.86, down $0.49), Family Dollar (FDO, $27.95, down $0.24), Pepsi Bottling Group (PBG, $33.80, down $0.20) and WD-40 Company (WDFC, $28.42, down $1.48). Thursday: 3Com (COMS, $4.75, $0.13), Chattem (CHTT, $66.47, down $2.19), Chevron (CVX, $64.42, down $2.10), Helen of Troy (HELE, $17.35, down $0.61) and Shaw Group (SGR, $26.47, down $0.72). Friday: Infosys Technologies (INFY, $36.21, down $1.12), PriceSmart (PSMT, $16.46, down $0.79) and Progressive (PGR, $14.48, down $0.69). ************************************************** 3. Current Trades & Closed Trades This section will be updated by the opening bell Monday morning, if not sooner, here in this space. ************************************************** 4. Closing Thoughts The market is right back at that “floor of support” I mentioned a couple of weeks ago and we did manage to stay within the trading range I had predicted we could see for the indexes. However, we are at the lower end of those ranges and although I have been bullish for the past three months, I’ve got my eye on the exit door if it gets ugly. The widely tracked S&P 500’s break below 900 was not a good omen and after failing to bust through its 200-day Moving Average, the index is now battling to hold its 50-day MA. The key numbers you want to watch are 875-880. If the S&P fails this level and earnings come in worse-than-expected then we could see a sell-off. I’m not ready to throw in the “bull” towel or wave a white a flag but there are times when you have to retreat or join the other side when it appears the market is about to take a change of direction. The bulls had a great run from March to June and could still surprise us with another push higher so we will have to see. The tight trading range has flushed out some traders but I am expecting price action and volume to pick up this week. For the Dow, the bulls will try and hold 8,000 and I would get nervous if we fell below 7,700-7,800. Since hitting multi-month highs in mid-June, both the S&P 500 and Dow have fallen 5%-6%. It appears the bears are eyeing a 10% correction so the bulls will need to stand up and fight if that is the case. I will be covering all of the action in the Blog so if you haven’t signed up for a subscription, do so today. Rick Rouse Rick@MomentumOptionsTrading.com]]>
