Market Alert - The Close

Wednesday was day three of a test of the Friday jobs report surge. SP500, DJ30, RUTX, SP400 all faded to test the 10 day EMA. Normal test support after a good break higher. NASDAQ and SOX are just a bit over their 10 day EMA, though they started higher after all.

In line with what we discussed Tuesday in terms of a test of the new surge higher. The indices and leaders testing to set up the next move. Three days of testing, something of a typical 1-2-3 pullback test of a good surge. The third day gets the traders antsy and a bit worried as the indices have not pushed higher and put in a follow through to the break higher. It would seem traders would learn, but emotions are hard to control when money is on the line and they often get in the way. That makes for some shakeout and then a new surge. The setup is there. We will now see if the bids return.

The session started the same as Monday and Tuesday with futures slightly higher. Nothing grand. At the bell stocks started to struggle and as on the other sessions, faded the early gains. A late bounce in the last two hours kept the indices at the 10 day EMA.

SP500 -6.25, -0.29%
NASDAQ -20.90, -0.40%
DJ30 -37.39, -0.20%
SP400 -5.52, -0.35%
RUTX -0.69%
SOX -0.77%

VOLUME: NYSE +2%, NASDAQ -2%

A/D: NYSE -1.3:1, NASDAQ -1.9:1

The earnings were overall good enough with RL, DIS, YELP, FOSL, KORS beating though results were either up or down. Economic data was better in terms of JOLTS with more hires and fewer quits. BAC's credit card usage report, however, indicates slowing by the consumer (-0.3%) that BAC says could show up in Friday's July retail sales report or in a June revision. Another day of mixed data, and after the massively weak string of productivity the past 3 quarters, it is just not very certain where the US economy is heading regardless of what the jobs report said last Friday.

Even so, the market still seems to hold the belief that, if the economy cannot hold the improvement or if the improvement turns out to have been contrived and thus bogus, the Fed will be there to provide whatever is necessary.

For now the market is in a test and still has leadership from chips, biotechs, and the big names. Throw in industrial equipment. Retail is struggling though some winners as noted above. Software is not as bulletproof. Definite test on for the last move, but this far it is rather normal with modest volume, narrow breadth.

So, a 3 day pullback to the 10 day EMA. Thus far normal. Definitely don't want it to start stretching into another 3 week lateral move as that would show the upside momentum is just not as strong. So far so good on this test and looking for a new move upside to start soon to give the Friday break a new kick in the pants.

Have a great evening!

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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