Key Juncture for Market's Near-Term Direction

George Brooks |


Yesterday, I noted that the bulls, not the bears, will signal the start of a correction. Their buying this year has been unrelenting, they have chased stocks up, and been quick to buy on the smallest correction, driving the market to new all-time highs.
Like pac men, they have gobbled up everything for sale.
If institutions curtail their accumulation of stocks, or begin to take profits, we will get the correction many expected to occur earlier in the year.
TODAY:

The breadth of the market (advancing issues vs. declining issues) has characterized the strength of this year’s surge in prices, reflecting institutions’ rush to buy stocks.
However, more than 300 NYSE stocks declined yesterday, which has only happened four times this year. It’s a negative. An increase in declining issues would signal a decline in bullish momentum,
But yesterday’s action may have been misleading, since the ratio of advancing issues to declining issues relative to up volume/down volume was positive.
This is a key juncture for the near-term direction of stock prices.
Is the jingle “Sell in May and go away” still viable ? So far it seems not, but we can’t rule it out, even if 2013’s surge extends a bit further.
The whole concept is a product of the Stock Trader’s Almanac’s “Best Six Months” for owning stocks (November 1 to May 1). The start and finish dates cannot be cut too close, the best six months can start earlier as it did in 2011.
The “Sell in May” adage gets credence from a reasonable corrective phase that tends to follow the best six months.
Based on yesterday’s market action, minor support is DJIA 15,250 (S&P 500: 1,643. Bulls do not want to see the DJIA go lower than 15,175 (S&P 500 1,635).
Investor’s first read – an edge before the open
DJIA: 15,302.80
S&P 500: 1,648.36
Nasdaq Comp.: 3,467.96
Russell 2000: 986.96
Thursday, May 30, 2013 (9:13 a.m.)
Apple (AAPL: $444.95)
Looks like a seller used AAPL’s high-volume breakout above resistance at $445 at the open to sell. Technically, its close at the day’s lows after a sharp rally is what is referred to in tech talk as a “one-day reversal,” which in this case indicates a further drop to $433.
FACEBOOK (FB - $23.32)
At $23.50, FB will have retraced two-thirds of its Nov. To Feb. 72.2% surge. That’s a significant correction and may suggest some serious concerns for its near-term fundamental outlook. As noted here a number of times, the $19 to $22 area represents important support. When buyers didn’t show at $25, a reasonable support level selling intensified. If Buying doesn’t develop in the low 20s, FB may have problems not yet known. Resistance begins at $25.60.
ECONOMY:
We have a full docket of economic reports this week. For access to information including charts and graphics go to www.mam.econoday.com .
There were 3,844 million jobs openings at the end of March, vs. 3,899 the month before, suggesting a continuing soft job market.
THURSDAY:
GDP (8:30)
Jobless Claims (8:30)
Corporate Profits (8:30)
Bloomberg Consumer Confidence (9:45)
Pending Home Sales Ix. (10:00)
FRIDAY:
Personal Income & Outlays (8:30)
Chicago PMI (8:30)
Consumer Sentiment (9:55)
George Brooks
“Investor’s first read – an edge before the open”
sensiblesleuth@gmail.com

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The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

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