SUMMARY:
- Stocks fight off weak open, close positive on a slight volume increase.
- PPI moves higher but intermediate goods slowing their climb.
- Production backs off some as manufacturers were cutting inventories.
- Housing starts rally back as volatility starts showing up in that market.
- NASDAQ trying a weak breakout as SP500 trades near the top of its range.
- CPI will tell next chapter in Fed rate hikes and in market base.
Stocks modestly bullish, shaking off PPI, closing higher on slight volume increase.
Futures were lower pre-market, and the rising PPI only added to the downside pressure. Stocks opened lower, NASDAQ gapping down and selling to the 50 day EMA. SP500 quickly sold to the 200 day SMA itself after a modest rebound effort in the first 30 minutes. Those support levels held, however, as volume did not ratchet higher in the early going.
After a 3 hour lateral move where SP500 skipped along just below the neckline to its head and shoulders base (1164), stocks jumped higher. The catalyst appeared to be comments from Treasury Secretary Snow that China was not manipulating the yuan. One worry has been that a trade war of sorts might start between the US and China over the yuan, but the real problem is a textile dispute where the Commerce department is being sued by the textile industry for opening 'free' trade with China on textiles. Neither side is operating on a free market basis so the arguments on both sides don't quite pass the smell test. In any event, it seemed as if the Treasury Secretary is trying to diffuse the situation because one of the points of the textile industry is the yuan should float against the dollar. The dollar had been weaker, but it jumped on the news and stocks followed.
After the touch of support and the catalyst, stocks shot higher in the afternoon session, turning positive and rallying into the close for some decent 0.5% to 0.9% gains. Volume edged higher, a good indication, but not enough to show the buyers were really taking over the action. After the Friday sell off and intraday rebound on volume, however, the Tuesday volume increase was a good addition. It is still not a strong move, but it shows a modicum of improvement as the indices weakened but then refused to give in.
This all started in late April with the high volume back and forth volatility that signaled some change trying to take hold. The rally off that level showed follow through, but then ran into distribution once more, unable to clear the March/April consolidation level. In the following selling, though there was distribution, stocks refused to give in, making a higher low and bouncing the past two sessions. Again, it is not strong and it is likely to be upset with another piece of news when it gets near the top of the consolidation range earlier this year, but it keeps showing the ability to come back. It is still working on putting that bottom in even in the face of continued Fed rate hikes and lower money supply. Talk about looking down the road.
In the end SP500 cleared the 1164 resistance and closed at the 50 day SMA. NASDAQ broke higher and out of the recent range or handle to its double bottom, clearing the 200 day SMA as it did. That puts it right in the heart of the late March/early April consolidation range. Both are trying to make a higher high to go along with the recent higher low. That is a big step, and they still have not made it, and they still have not shown the strength to make it just yet. |
