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MV Weather Report: Second Quarter Runs Hot and Cold


Rain or shine, we review the day's biggest stock stories.

The Conference Board released its monthly consumer confidence numbers today. It came in worse than expected, at 49.3, compared to estimates of 55.3. An even bigger disappointment: It fell short of May's number, 54.9. Any number below 50 is seen as bearish.

The S&P 500 certainly responded bearishly, selling off by 0.85% and closing at 919. The index did, however, manage to close above the day's low of 912.

It was a trend day down for the market, but there were still a few winners: First Solar (FSLR), Research In Motion (RIMM), and Baidu (BIDU). Losers were much easier to come by: Potash (POT), Transocean (RIG), Deere (DE), and Lockheed Martin (LMT) were all down for the day.

Today was the last day of the second quarter: The S&P 500 rose by 15% for the period, but was practically flat for the months of May and June, most likely due to the massive rally in March and April.

Many investors were looking for a pullback in the market; others -- the ones who missed the rally -- were looking to buy pullbacks. In other words, we went sideways for 2 months.

If you follow Kevin Depew's TD work, here's a Buzz about his view of the S&P:

" Daily: On the upside, the 944.43 level is a critical level that, if broken in a qualified manner, would tell us the probabilities have increased that the rally will be longer-lasting than many expect. On the downside, a qualified break of the TDST level at 847.12 would tell us the larger downtrend is now likely to resume. That's a large range.

"Weekly: We can reduce the size of the range by combining our analysis with weekly charts. The weekly chart shows a very important TDST Up level (resistance) at 890.40. Wait, how can a level that has already been breached act as resistance? Because it has not yet been broken in a QUALIFIED MANNER.

"Remember, the rules for qualification are a down close (we are talking weekly time frames here, remember) followed by an up close above the level. Then, we must have an open above the close and at least one tick above the open. IF we close this holiday week above 918.90 AND we open above this week's close next week and tick at least one tick higher than the open, that level will be broken in a qualified manner. This would tell me the probabilities have increased that 944.43 is subsequently broken in a qualified manner and extend the window of positive market forces by 10-12 weeks.

"Bottom Line: On a daily basis, support is 847.12, resistance 944.43. A close this week above 918.90 will set up the possibility of a qualified breakout for SPX on a weekly basis, which would extend the window of positive market forces."

Tomorrow is the first day of July, and traders will be watching the ADP Employment Change (estimated to drop 394,000) at 8:15 a.m. It will be followed by Construction Spending (estimated to drop 0.6%) and the ISM Index (estimated at 44.6)at 10:00 a.m.

Not much else on the radar tomorrow. Expect the trading action to get slower as the holiday approaches.

Have a great one!
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