1:05pm (EST)

The bulls are back up to their old tricks as they have started the day in positive territory, but where we end up remains to be seen.  The market is testing key resistance levels despite a lower-than-expected number on housing sentiment. 

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The National Association of Home Builders reported its housing market index fell to 17 in June, down 5 points, after two straight months of increases.  Not only that, the number was the lowest reading since March.  The tax credits of up to $8,000 expired on April 30 so we knew this number might come in low but not this low. 

On Wednesday, we get more housing data with Housing Starts and Building Permits and those numbers could come in worse-than-expected.

BP (BP, $31.62, up $0.95) is front and center as things heat up on the Hill.  The company’s U.S. CEO is in Washington today and has said they are speeding up the claims process.  BP said it has approved initial payments towards 90% of the commercial large loss claims that have been filed as a result of the oil spill that has been going on for 2 months now.  Obama time is 8pm (EST) as he gives the nation an update.

Best Buy (BBY, $38.36, down $2.69) is down about 7% after disappointing Wall Street with its numbers.  The company announced earnings of 36 cents a share versus expectations of 50 cents a share.  The company also missed on their revenue number.

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As we head to press, the Dow is up 133 points to 10,324 while the S&P is up 15 to 1,105.  The Nasdaq is higher by 40 points and is at 2,284.

Our key resistance levels remain Dow 10,300; S&P 1,100 and Nasdaq 2,300.  The more times we test resistance and fail, the worse the correction might be.  Support has held up well at 1,050 for the S&P, but if the index can’t break resistance then we don’t think support is going to hold next time around.

A lot of investors turn bullish at market tops and bearish at market bottoms.  Of course, there is still a slight chance the bulls break through key resistance levels, but new bull markets need new leadership, AND the Financial stocks to participate.  We are not seeing that.  Is housing going to lead a new bull market?  Not.  Financial stocks will remain under pressure until financial reform gets resolved.  Tech…maybe, Retail, no.

Given this backdrop, we are still cautious of any market rallies.  We are still in a extremely tough market environment and perhaps a “stock picker’s market”.  Either way, the TREND is still lower.  If we are wrong then there will be PLENTY of opportunities to go long if we break above the 200-day moving averages.

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