Stock Market Regains Foothold: April 23-27

The world markets all had red in their prices Monday, which spread into the United States market. However, there was not heavy selling, but rather sympathetic selling to the Asian and European markets. Generally the U.S. is a leader not a follower, so these actions were pressuring an unwilling market downward. I was surprised there was not more minus NYSE tick, which means that the market was not panicked, but maintained a cool temperament for the time being. The day brought a healing process to the condition and the bulls enjoyed a 10-point rally. Obviously, the market is still a confident entity. It is very resilient and any stabilization from the world’s markets should give the stock market strength to rise higher. I watch a very important signal area regarding the 30-year bonds. The signal is pretty simple. It is the size distribution of the bids and offers. There has been a very strong size presence on the bids overwhelming offers recently. Tuesday’s action reminded me of a market lacking commitment. The volatility was very contained while volume was light. The NYSE tick did not exhibiting extremes. Overall, it looked like a summer Siesta! The overall clarity to the Standard & Poor’s market is a 1390 resistance and a 1350 support. Both of these are creditable and durable.  A close above 1390 or below 1350 should instigate new momentum.  It is refreshing to see that the bonds are starting to breath. They have a long way to correct and reach equilibrium, but they are no longer showing all up ticks exclusively. A key short-term support is 141 ’30. If penetrated on a close, the downside will pick up speed.

The FOMC announcement lacked enthusiasm with no newness to phrases or terminology. It was simply a day of no new revelations in regard to the Feds position. They seemed interested in taking edges off of anticipation regarding their statements. There should be some commentary stating somewhere: “Why did the Fed even meet? They did nothing!” It is interesting when the Federal Reserve clicks their machine’s buttons OFF and ON, especially on Fed days. It is noteworthy when they are off, because the bonds go down, denoting their genuine heaviness. A full directional change will not ensue until the Fed goes to the sidelines indefinitely.

As of Thursday, the chart pattern showed resistance at 1390, which was penetrated in intraday trading. An S&P 500 close above 1390 would be considered a breakout. The next resistance is 1420. The reversal the bears would pray for is a close back below 1390 within the next three trading days. The bonds are not showing indirect correlation lately. In fact, the month of April has displayed a disjointed trading pattern in regard to the S&Ps and the bonds.

In an American Public Media's Marketplace interview, U.S. Treasury Secretary Timothy Geithner says, “if Europe mismanages their crisis it could slow U.S. growth, but U.S. financial system could handle any resulting pressures. The U.S. financial system is in a very strong position to withstand the foreseeable pressures we might face from Europe.” Geithner heads to Beijing along with Secretary of State Hillary Clinton next week for Strategic/Economic Dialogue with the country.

Corporate earnings reports could prove to be a catalyst for the stock market yet again as the new month begins. Chesapeake Energy, Pfizer Inc., Prudential Financial, Time Warner, Viacom Inc., Visa Inc. and Kraft Foods are all companies with great potential to influence the stock market next week with their reports due out.

The 1400 threshold is certainly a psychological barrier. A higher S&P high extended through it on Friday. U.S. stocks sprung up to close out the week due to stronger than anticipated earnings, particularly from and Expedia Inc. I always pay close attention to excessively high tick on the New York Stock Exchange during bullish raves and take note of the market’s performance in conjunction with it. Moreover, the plus 1200 faded beautifully for a 3-point pull back without any angst, indicative of normal trading movements once extremes are registered. The S&P 500 remains well above its 50-day moving average and up 11.6% on the year.