9:00am (EST)
“The bulls were on the verge of a breakout last week and we often mention how support and resistance can get “stretched”. Coming into June, the bears had all the momentum following May’s selloff and while we thought there could be further weakness, we knew the indexes were due for a bounce, or back test. The rebound lasted a week longer than we anticipated due to the huge rally following the European Union (EU) summit but we knew their latest “plan” was just another excuse for kicking of the can down the road further.
There was a lot of bullishness going into Friday’s jobs data but just like we saw the bears have trouble cracking support, the bulls ran out of ammo when the number disappointed.
We have mentioned the 2-month trading range the market has been in and Friday’s selloff was just one day. This week will be all about the start of earnings and the FOMC minutes.
This earnings cycle could be one of the worst since 2009 as we have seen over 100 companies warn and lower estimates. Profits could fall nearly 2%, on average, according to the suit-and-ties.” (from 7/8/2012 Weekly Wrap/ Monday Morning Outlook)…
The bears were making a nasty assault on the bulls for much of the week after cracking major support levels following a mixed bag of earnings and continued worries over Europe. The major indexes were dancing near their 100-day MA’s (moving averages) coming into the week and the 4-day selloff had pushed them below their 50-day MA’s by Thursday. The 200-day MA’s were right in sight but Friday’s huge bounce gave the bulls a piece of the weekly win pie.
Friday’s rally was all about JPMorgan Chase (JPM, $36.07, up $1.96) which beat Wall Street’s estimates and short-covering. Shares rallied 6% on the news and closed just above their 50-day and 200-day MA’s. The earnings bar was already lowered significantly for the company and they reported a wider-than-expected loss for its now famous “Whale trade”. However, the company still made a profit which sent shares soaring.
JP also lowered their guidance for the current quarter and in a perfect bears’ world, all of the negatives should have sent shares reeling. The total loss for the London debacle is now estimated at $5.8 billion but no one knows what to believe. There was a review of nearly 1 million emails and thousands and thousands of voice tapes that suggest a cover-up but we will let the market make those judgments.
Going into Friday, the Dow and S&P 500 were down 2.2% for the week but both finished with slight gains. The Nasdaq was down 94 points, or 3.4% for the week, before recovering most of its losses back off Thursday’s low. The index still finished lower for the week along with the small-caps (Russell 2000).
We have mentioned volatility would be picking up and last week’s 2% intraday moves are a telling sign this market is ready to explode higher, or, Friday’s back test was the last in what could be a huge correction coming. (read more…)
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