I had mentioned we may be on our way to the 1429 level on the S&P futures and that we might not go there all at once.
We tested a bit higher early this week to the 1408 level and have headed south since, closing today at 1389. We probably don't want to get too bearish and start thinking the end of the world just yet. As I said, 1429 is likely and 1421 corresponds with the key 127% area.
From a statistical standpoint however, the length and strength of this run since last October, is very long indeed and I believe one of the longest and strongest ever. Ironically, of course, this is all happening on "growth" numbers that are downgraded and worked over. Many are saying it is an Apple rally, and rightly so. I think I had mentioned last week that according to S&P, Apple is bigger than all other retailers combined.
Some have noted that the people who buy these products in the 20-35 age group in particular, who in the 1980s were called yuppies for showing off their nouveau riche riches now has little money and may not even have a car or own a home. This is a group that would typically be the catalyst to drive an economy to new territory. Now, instead of "wealth", they wield the power of having the world in their hand, all tied up in a device the size of a book. It is said the pen is mightier than the sword. This may indeed be that case. And this may be a case of it. Do we have a revolution on our hands? Or, is it short lived.
At the same time, I am seeing federal student loans (another government/Wall street induced bubble) have neared the $1 trillion mark. These are not being paid back in large numbers. To make matters worse the graduates who are responsible for the payback of these notes don't have high paying jobs; the manufacturing that drove the yuppies of the 80s to wealth is now gone. It will truly take a new wave of innovation to pull us out of this. Is it staring us in the face, or smoke and mirrors? Enough said on this.
I was noting today, we had not yet retraced 38% of the run in the Emini S&P since March 6th. It would probably be healthy for us to see a more substantial retrace than this for the market to remain healthy. This way lower prices can advertise for new buyers.
McDonald's (NYSE:MCD), which has been in an amazing bull run for quite some time has recently shown a decline in earnings, revenues and shareholder equity. Here is the interesting thing about this company. They expanded their operations into Asia and this has fueled growth for them. I was recently in Hong Kong and you literally cannot go 100 yards on the street there and not find (another) McDonald's. It is jaw dropping really to see the growth there. But, it was said the decline was due to sales falling in that market. I have also seen other scary numbers from China, like their trade deficit numbers recently.
McDonald's increased their dividend at the same time suggesting they did not feel the slump would continue. McDonald's has increased their dividend every year for the last 34 years. How about them apples?
Speaking of Apple and dividends. They announced a dividend this week. Does this mean they are not a "growth" company any more? This will put Apple stock into a lot of income related ETFs and funds. So it should be bullish in the short run.
On the subject of Asia- a very high percentage of stocks that have done well like MCD, have done so due to globalization of their business model.
OK back to the market.
I am seeing some virgin points on the chart in the 1377 area. So, I'd keep my eye on that in the near term.We saw a V bottom this afternoon showing there are plenty of bulls who have not given up. I suspect we are going to see a bit more downside however in the remainder of this month. As I said, this is healthy (if you are a bull).
I also see 1375 and 1363 as key. 1364.50 is a high volume node also so watch this area. If we start to get there (1363-1367), it will more likely become a magnet. This is not unlikely based on this weeks range.
Another thing that happened today in the Russell. The low today was a 100% extension of the first sell off from the high. This is a likely area for support. And in the S&P futures it was much less., so don't be surprised if we see some more testing lower.
The V bottom we saw this afternoon had a strong right skew to it; 3, 30 minute bars encompassed 9, 30 minute bars of price action. A ratio of 3:1. If this gets traction tomorrow (Friday) we could see 1397 to 1398.50 as resistance.
We have new home sales at 10AM EDT and two FOMC speakers tomorrow. See if those events, particularly the home sales gets any traction.
As always, check my intraday targets for the ES Emini S&P Futures and the Russell Futures, symbol TF. These targets have a historical hit rate of between 77 and 94%. It is worth noting the twitter feed or the site in the AM for this complimentary information.
That's all for now.....