How to Spot Boom and Bust Cycles

One of the most important aspects of trading is being able to properly identify major market cycles and trends. The markets will typically move between four separate stages: Bottoming/Basing, Rallying, Topping/Distribution, and Bearish Trending. Each of these phases of market trends is often associated with various degrees of market segment trending as well. 

 For example, one of the most telling phrases of when the stock market is nearing an eventual Topping/Distribution phase is when the housing market gets super-heated. Yet, one of the most difficult aspects of this Excess Phase rally trend is that it can last many months or years, and usually longer than many people expect.

When an Excess Phase rally is taking place in the stock market, we expect to see the Lumber vs. Gold ratio moving higher and typically see the RSI indicator stay above 50. Demand for lumber, a commodity necessary for building, remodeling, and other consumer essential spending, translates well as an economic barometer for big ticket consumer spending. 

Extreme peaks in this ratio can often warn of a pending shift in consumer spending and how the stock market reacts to an Excess Phase Peak. Let’s take a look at some of the historical reference points on this longer term Weekly Lumber vs. Gold chart....Read More Here.

Technical Analysis and Rates Unchanged – Here We Go

The U.S. Federal Reserve is one of the only central banks to attempt to raise rates consistently over the past few years, has possibly learned a very valuable lesson – no good comes from raising rates to the point of causing another market collapse. The news that the US Fed will leave interest rates where they are, temporarily, is good news for a number of reasons.

First, this allows the markets to shake out weaker players and weaker components of the corporate world. Where corporate debt levels are concerned, interest rates are tied to debt repayment liabilities and refinancing costs. Firms that are unable to manage at current interest rates certainly would not be happy about rising rates. This allows these corporations to either struggle to resolve their debt issues or collapse under the weight of their own debt. This will also play out in the foreign markets as well.

Second, it allows the housing market and private debt markets to shake out some of the “at risk” consumers. We authored an article a few months ago about how foreclosures and pre-foreclosures were starting to increase in nearly all markets. At the time, many people in the real estate field shrugged off these increases as par for the course. With the decreasing foreign investment in real estate and the increasing pressures on the local consumer markets, we saw a dramatic slowdown in housing starts and sales activities recently. This is because the demand side of the market is falling much faster than the supply capacity.

The uncertainty in the foreign markets, global central banks, and foreign investments have prompted many people to pull out of the local markets – even the hot markets. The at-risk consumers that were trying to sell near this top suddenly found the buyers were just not there or ready to make the commitment. This put the at-risk consumers in a difficult position as they could not flip their houses as easily as they could 6 months ago.

Yet, in the global equity markets, investors can sell or buy with much faster transaction times – at the click of a mouse button in most cases. This allows equity investors to pull capital away from risky investments and migrate that capital into more secure investments in a matter of minutes or hours – not weeks or months. And that is exactly what has been happening over the past 30+ days in the global markets.

Capital is repositioning for the next phase of this market; where the US economy is strong, housing continues to weaken and at-risk consumers continue to feel the pressures of the US Fed interest rate policies. Where foreign consumers attempt to deal with their own version of “central bank hell” and asset devaluations in an attempt to find more secure investment vehicles for their capital. Money market funds, investment funds and, of course, the US value/blue-chip equities are looking very promising right about now.

This Daily SPY chart shows our recent ADLC indicator (price cycle turning points) and our oversold extreme price levels shaded with lime green. When these two things align the market tends to rally for 1-3 days with strong momentum. During pre-market last week, we told our followers that the big gap lower in price was going to be bought and price should rally for 2-3 days, which is exactly what has unfolded thus far.

Global capital will continue to rush into the US markets as long as the US Fed does not do anything to derail things. Our research team believes the US Fed may even decrease the interest rates by 0.25% before the end of the year depending on how much pressure is placed on the economy by these “at risk” participants.

We will continue to keep you updated as to our findings and we want to urge you to visit The Technical Traders Free Market Research to read all of our most recent research posts. You really owe it to yourself to understand what is happening in the global markets right now and how we have continued to stay 30-60 days ahead of these moves for our valued members. There are so many opportunities setting up in the markets for traders it is almost hard to understand the dynamics at play right now. If you want a dedicated team of researchers and traders to help you navigate these markets, then visit The Technical Traders to learn how we can provide you with even more detailed daily research and support.

Chris Vermeulen

Five Easy Ways to Make Your Finances Less Fragile

By Justin Spittler

A few days ago, we sat down with E.B. Tucker, editor of The Casey Report, to talk shop. The conversation was so good, we just had to share it with you. In the following interview, E.B. talks about how he manages his own money. As you’ll see, he has a unique, yet intuitive approach to investing, especially when it comes to asset allocation. We hope you find this conversation as useful as we did. Also, make sure you read until the end to learn about one of E.B.’s top speculations.

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Justin Spittler: I want to talk investment strategy. Could you tell us how you manage your own money?

E.B. Tucker: I like to break up my investments into buckets. I have about five of them. I have one for gold, one for permanent life insurance, one for real estate, and two for stocks. I don’t limit myself to a certain number of buckets. But I’ve had very good results looking at asset allocation this way.

J.S.: Can you tell us a little more about your “buckets”? Why do you break them up this way? What kind of assets go into each?

E.B.: First of all, the buckets change with life and market conditions. For example, I put most of my capital into a real estate bucket in 2009–2010. As you know, the U.S. housing market had just crashed. If you had the capital, you could buy some houses for next to nothing. And that’s exactly what I did.…

During that period, I bought six single-family homes. I bought one of them for just $10 per square foot. I spent another $10 per square foot fixing the place up, so I put about $20 per square foot all in. The guy before me paid $160 per square foot and ended up in foreclosure. He bought near the peak of the housing bubble. My timing was much better. Today, I’m not adding to my real estate bucket. There just aren’t that many great deals out there. This is key to how I invest. Rather than fight the market, I let it determine how I allocate my money.

J.S.: Can you tell us about some of your other buckets?

E.B.: Well, I have a bucket for gold. But I don’t view gold as an investment designed to make money. I see it as a key long term asset. When gold is cheap, I pour money into this asset. I don’t think about this bucket often. I just get the gold, vault it, and move on.

I also have a permanent life insurance bucket. This bucket is important because I have a few people that depend on me. If I die, they’re out of luck. So, I need to have life insurance. Specifically, I own a couple dividend-paying life insurance policies. A lot of people consider these terrible investments, but that’s because they don’t understand them.

You see, any extra money that I put in this bucket on top of the minimum annual premium grows 6% to 7% per year, tax free. If I don’t use the policy, over time I’ll have a fairly large amount of cash in that bucket that I spend, borrow from, or use to buy more life insurance. And, of course, if the worst does happen, my dependents receive a large death benefit. This money will help them get by in my absence.

J.S.: Interesting, it sounds like this bucket protects you and gives you flexibility.

E.B.: Exactly. The reason I invest this way is because it makes me less “fragile." Now, I still have plenty of exposure to rising asset prices in other buckets. But, if you’re smart about when and how much you add to each bucket, your “boring” buckets will eventually balance out your more speculative buckets. The result is a more stable financial situation without giving up the quest for profits. I like investing this way because I no longer worry about trying to maximize my profit on every trade or every time the market changes course.

J.S.: Let’s talk about your stock buckets next. I’m sure our readers would love to know what’s in your portfolio. 

E.B.: Sure. As I said earlier, I have two of them. One is for stocks I plan to hold for the long haul. I don’t trade these stocks often. I’m only a seller if something happens that changes the business landscape for one of the companies. I typically own between six and eight of these companies at any given time. One of my favorite long term holdings is a company that make crackers you buy at the gas station and pretzels that go well with beer. Last year, the company acquired a business that sells almonds and other nuts. It’s a great company. And it now pays me a decent yield of 3%, since I’ve owned the stock for a few years.

J.S.: What are some of your other long term stock holdings?

E.B.: I also have shares of one of the country’s best regional banks. And I own shares of one of America’s most iconic companies. This company is basically a drug dealer, peddling sugar and caffeine from small rented stores. You get the picture. Now, these aren’t the most exciting investments in the world but, over time, you see the value of owning rock solid American businesses.

You end up with companies that slowly capture market share from their competitors, invest money back into their businesses, and pay dividends. I don’t see how you can get hurt having this bucket represent 20% of your net worth. It’s also worth mentioning that I like to own these stocks in company sponsored dividend reinvestment plans.

Since these are long-term investments, I don’t want to log into a brokerage account and see them next to my trading positions every day. Holding them directly on the company’s books means all my dividends get reinvested into additional shares, usually at no cost. The final benefit is I don’t have to worry about my broker going bust. Holding shares directly registered with a company means there’s nobody standing between you and your investment.

J.S.: That leaves us with your speculation bucket. Can you tell us a little bit about this one?

E.B.: Ah, my favorite. I’ve done fairly well speculating. The key here is separating good speculations from bad ones. As a professional investor, a lot of opportunities come across my desk. Most of them aren’t worth my time. You have to pass on a lot of bad speculations before you find a great one.

J.S.: Can you tell us about one of your better speculations?

E.B.: At a lunch meeting with my banker in 2009, he told me about a company in town that invented a hurricane simulation machine. They placed a few in malls, shopping centers, arcades, and museums and charged $2 per customer. The test machines took in $4,000 to $5,000 per month. The company built each machine for around $12,000. The company had trouble getting a bank to lend it money. It was right after the financial crisis, after all.

I met with the company, saw the machine, and looked at their business plan. A few other investors and I funded the company. We bought preferred shares that paid a 20% dividend. We also received a portion of the company’s profits for the first two years, which boosted our initial returns. Seven and a half years later, I’m still collecting monthly checks from the company. I’ve more than doubled my money, and I could sell the shares anytime I want.

J.S.: Have you done any other speculations like this recently?

E.B.: Yes. Before I got into this business, I ran a gold fund for a few years. My former business partner from that fund just took his gold streaming and royalty company public. Our company policy does not allow me to share the name of the stock, since I own shares. I’m involved in that deal to the tune of about 1% of the company. I think there’s a realistic shot that I’ll make 5–10 times my money.

J.S.: Most people would kill to make that much on a single investment. Why are you so optimistic?

E.B.: I think it’s a good time to speculate on small gold and silver stocks. I especially like royalty and streaming companies like this one. They avoid the tremendous financial burdens that mining companies face.
I also look for companies that have a winning strategy but that are overlooked by the market. If these companies execute, my odds of success go up.

But you need to have cash on hand, or what some people call dry powder, to take advantage of these opportunities. That’s because great deals usually require quick action. When one of my speculations is a winner, I’ll take profits and put them into other buckets, depending on what looks good at the time. I almost never leave the entire profit in the bucket it came from.

J.S.: Got it. So, do you like to keep a certain percentage in each bucket at any given time? What rules, if any, do you follow?

E.B.: I don’t really follow a set of rules when it comes to asset allocation. That makes it hard to take advantage of huge opportunities when they appear. For example, I wouldn’t have invested in the Florida rental real estate market in 2009 and 2010 if I stuck to strict rules. When in doubt, you can divide new money equally between buckets. You can also sit on cash and wait for buying opportunities to present themselves.

J.S.: What kind of investments do you focus on in The Casey Report?

E.B.: That’s your most valuable question so far. In The Casey Report, we fill the long-term stock and speculative stock buckets. We try to predict what the investing world will be like one to two years down the road. We then buy stocks that will benefit most as the world changes. In stock investing, that’s the sweet spot where you find the most value in the shortest period of time.

Our goal is to beat the S&P 500 every year. We want our readers to have enough success to irritate their wealth manager. Hopefully, they can use that success and the lessons learned in The Casey Report to beat the market in their asset buckets.

J.S.: Thank you for your time, E.B.

E.B.: You’re welcome.

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In August, E.B. told his readers to buy a small North American mining company. At the time, few investors knew about the company. Its stock traded for less than $1. But E.B. said the stock wouldn’t fly under the radar for much longer…and he was exactly right.

In just four months, this stock has soared 115%. Normally, we wouldn’t encourage you to buy a stock after an explosive run like this. But E.B. recently went on record and said, “the stock doubled, it will double again.” To see why, watch this brand-new presentation. It talks about an event that E.B. says will take place exactly one month from today. If the event goes as expected, this stock should skyrocket again.

You can learn more about this event, including how to take advantage of it, by watching this FREE video.

The article Five Easy Ways to Make Your Finances Less Fragile was originally published at caseyresearch.com.

Yellen’s Wand Is Running Low on Magic

By Doug French, Contributing Editor

How important is housing to the American economy?

If a 2011 SMU paper entitled "Housing's Contribution to Gross Domestic Product (GDP) quot; is right, nothing moves the economic needle like housing. It accounts for 17% to 18% of GDP. And don't forget that home buyers fill their homes with all manner of stuff—and that homeowners have more skin in insurance on what's likely to be their family's most important asset. All claims to the contrary, the disappointing first quarter housing numbers expose the Federal Reserve as impotent at influencing GDP's most important component.

The Fed: Housing's Best Friend

 

No wonder every modern Fed chairman has lowered rates to try to crank up housing activity, rationalizing that low rates make mortgage payments more affordable. Back when he was chair, Ben Bernanke wrote in the Washington Post, "Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance."

In her first public speech, new Fed Chair Janet Yellen said one of the benefits to keeping interest rates low is to "make homes more affordable and revive the housing market."

As quick as they are to lower rates and increase prices, Fed chairs are notoriously slow at spotting their own bubble creation. In 2002, Alan Greenspan viewed the comparison of rising home prices to a stock market bubble as "imperfect." The Maestro concluded, "Even if a bubble were to develop in a local market, it would not necessarily have implications for the nation as a whole."

Three years later—in 2005—Ben Bernanke was asked about housing prices being out of control. "Well, I guess I don't buy your premise," he said. "It's a pretty unlikely possibility. We've never had a decline in home prices on a nationwide basis." With never a bubble in sight, the Fed constantly supports housing while analysts and economists count on the housing stimulus trick to work.

2014 GDP Depends on Housing

 

"There's more expansion ahead for the housing market in 2014, with starts and new-home sales continuing to rise at double-digit rates, thanks to tight inventory," writes Gillian B. White for Kiplinger. The "Timely, Trusted Personal Finance Advice and Business Forecast(er)" says GDP will bounce back. Fannie Mae Chief Economist Doug Duncan says, "Our full-year 2014 economic forecast accounts for three key growth drivers: an acceleration in spending activity from private-sector forces, waning fiscal drag from the federal government, and continued improvement in the housing market."
We'll see about that last one.

Greatest Housing Subsidy of All Time Running Out of Gas

 

With the central bank flooding the markets with liquidity, holding short rates low, and buying long term debt, mortgage rates have been consistently below 5% since the start of 2009. For all of 2012, the 30 year fixed mortgage rate stayed below 4%. In the post gold standard era (after 1971), rates have never been this low for this long. The Fed's unprecedented mortgage subsidy has helped the market make a dead cat bounce since the crash of 2008. After peaking in July 2006 at 206.52, the Case-Shiller 20 City composite index bottomed in February 2012 at 134.06. It had recovered to 165.50 as of January. However, while low rates have propped up prices, sales of existing homes have fallen in seven of the last eight months. In March resales were down 7.5% from a year earlier. That's the fifth month in a row in which sales fell below the year earlier level.

David Stockman writes, "March sales volume remained the slowest since July 2012." He listed 13 major metro areas whose sales declined from a year ago, led by San Jose, down 18%. The three worst performers and 6 of the bottom 11 were California cities. Las Vegas and Phoenix were also in the bottom 10, with sales down double digits from a year ago. This after housing guru Ivy Zelman told CNBC in February, "California is back to where it was in nirvana." Considering the entire nation, she said, "I think nirvana is not far around the corner… I think that I have to tell you, I'm probably the most bullish I've ever been fundamentally, and I'm dating myself, been around for over 20 years, so I've seen a lot of ups and downs."

Housing Headwinds

 

Housing is contributing less to overall growth than during both the days of 20% mortgage rates in the 1980s and the S&L crisis of the early 1990s. In Phoenix, where home prices have bounced back and Wall Street money has vacuumed up thousands of distressed properties, the market has gone flat. In Belfiore Real Estates' April market report, Jim Belfiore wrote, "The bad news for home builders is they have created a glut of supply in previously hot market areas… Potential buyers, as might be expected, feel no sense of urgency to buy because they believe this glut is going to exist indefinitely."

Nick Timiraos points out in the Wall Street Journal that with a 4.5% mortgage rate and prices 20% below their peak, "… homes are still more affordable than in most periods between 1990 and 2008." So why is demand for new homes so tepid? And why have refinancings fallen 58% year over year in the first quarter?
"Housing's rocky recovery could signal weakness more broadly in the economy," writes Timiraos, "reflecting the lingering damage from the bust that has left millions of households unable to participate in any housing recovery. Many still have properties worth less than the amount borrowers owe on their mortgages, while others have high levels of debt, low levels of savings, and patchy incomes."

More specifically, "So far we have experienced 7 million foreclosures," David Stockman, former director of the Office of Management and Budget, writes. "Beyond that there are still nine million homeowners seriously underwater on their mortgages, and there are millions more who are stranded in place because they don't have enough positive equity to cover transactions costs and more stringent down payment requirements." Young people used to drive real estate growth, but not anymore. The percentage of young home buyers has been declining for years. Between 1980 and 2000, the percentage of homeowners among people in their late twenties fell from 43% to 38%. And after the crash, the downtrend continued. The percentage of young people who obtained mortgages between 2009 and 2011 was just half what it was ten years ago.

Young people don't seem to view owning a home as the American dream, as was the case a generation ago. Plus, who has room to take on more debt when 7 in 10 students graduate college with an average $30k in student loan debt? "First time home buyers are typically an important source of incremental housing demand, so their smaller presence in the market affects house prices and construction quite broadly," Fed Chairman Ben Bernanke told homebuilders two years ago.

There's not much good news for housing these days. For a little while, the Fed's suppression of interest rates juiced housing enough to distract Americans from weak job creation and stagnant real wages. Don't have a job? No problem! Just borrow against the appreciation of your house to feed your family. But Yellen's interest rate wand looks to be out of magic. The government had a pipe dream of white picket fences for everyone. But Americans can't refinance their way to wealth. Especially in the Greater Depression.

Read more about the Fed’s back-breaking economic shenanigans and the ways to protect your assets in the Casey Daily Dispatch—your daily go-to guide for gold, silver, energy, technology, and crisis investing.

Click here to sign up—it’s Free.

The article Yellen’s Wand Is Running Low on Magic was originally published at Casey Research

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The Headline Data that Financial Media Ignored on Wednesday

Wednesday was a wild trading session where we saw the largest intraday selloff in the S&P 500 E-Mini futures that we have seen in some time. Intraday price action was driven largely by statements made by Chairman Bernanke and the release of the Federal Reserve Meeting Minutes which saw some monster intraday moves and a large spike in the Volatility Index (VIX).

While the world is focused on when the Federal Reserve is going to taper their Quantitative Easing program and the impact those actions will have on financial markets, I wanted to look at another divergence in the economic data which is supported by market action.

Instead of trying to determine how or when the Federal Reserve will taper or end their monetary experiment, I wanted to juxtapose statements that were made today with the actual facts. Readers can draw their own conclusions.

Recently, we have been told that the housing market is in the early stages of recovery. Unfortunately due to low interest rates housing has turned back into a speculative market. Consequently, a lot of so called fast money is flowing into housing which in many cases is either being purchased for rentals or by foreign investors as a speculative investment.

At present the housing market is not being driven by capital formation at the household level and data indicates that construction jobs are under pressure and affordability is reversing.

This first chart illustrates what has recently transpired in the 10 Year Treasury Yield.....Click here to read J.W. Jones' entire article and view his charts for "The Headline Data that Financial Media Ignored on Wednesday"


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Is Consumer Confidence and Housing Enough to Stop Crude Oil's Run?

No doubt that 2010 was no 2009 when it comes to oil prices with 2010 bringing a mere 14% gain compared to 2009's 78%. Can 2011 continue the run in the face of even worse consumer confidence reports in the U.S. and a larger than expected drop in home values as the S&P/Case-Shiller index of U.S. property values reported a decline of 0.8 percent in October from a year earlier. If anything can bring down the commodity and equity markets in 2011 it's the much feared double dip in the U.S. housing market.

Say it can't happen? Like anything else in life, just follow the money. The smart money. Why are the banks refusing home loans without large cash down payments? Simple, because when issuing a loan it is really the bank that is investing in the home, not the home owner. The lender is only hoping the home owner will pay it off for THEM! Smart money [the banks in this case] know that the homes are not worth the current prices even as low as they are, making a double dip inevitable.

We know what this will do for consumer confidence in the U.S. but will it stop China and India's rapid expansion and continued increase in energy demand? Unlikely, welcome to the new world economy. Here's your trading numbers for Wednesday morning......

Crude oil was lower due to light profit taking overnight. Stochastics and the RSI are diverging but remain neutral to bullish signaling that sideways to higher prices are possible near term. If February extends the rally off November's low, May's high crossing at 93.87 is the next upside target. Closes below the 20 day moving average crossing at 89.45 would confirm that a short term top has been posted. First resistance is Monday's high crossing at 91.07. Second resistance is May's high crossing at 93.87. First support is the 10 day moving average crossing at 90.08. Second support is the 20 day moving average crossing at 89.45. Crude oil pivot point for Wednesday morning is 90.94.

Natural gas was slightly lower overnight as it consolidates some of Tuesday's rally. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 4.295 are needed to confirm that a short term low has been posted. If February renews this month's decline, November's low crossing at 3.913 is the next downside target. First resistance is the 20 day moving average crossing at 4.295. Second resistance is the reaction high crossing at 4.554. First support is the reaction low crossing at 3.985. Second support is November's low crossing at 3.913. Natural gas pivot point for Wednesday morning is 4.240.

Gold was slightly lower due to light profit taking overnight as it consolidates some of Tuesday's rally. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. If March extends Tuesday's rally, this month's high crossing at 1432.50 is the next upside target. Closes below the reaction low crossing at 1361.6 would confirm that a short term top has been posted. First resistance is the overnight high crossing at 1410.00. Second resistance is this month's high crossing at 1432.50. First support is the reaction low crossing at 1361.60. Second support is the reaction low crossing at 1352.00. Gold pivot point for Wednesday morning is 1398.70.


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Crude's Rally Derailed from Fundamentals Again

Strength in stock markets and decline in USD were the major reasons for the rises in commodities. In the US, Dow Jones Industrial Average climbed +2.2% to settle at 9820 while S&P 500 Index surged +2.6% to 1068.3 as driven by better-than-expected housing market (housing starts), employment situation (jobless claims) and improvements in manufacturing activities (Empire State and Philly Fed Index). The dollar weakened further with every rebound being treated an opportunity to sell as investors' risk appetite increases. In the coming week, the FOMC meeting will be market's focus. While the Fed will likely announce to keep its policy rate at 0-0.25% for an extended period of time, it may talk more about plans for exiting from the current stimulus policies.

Crude Oil
Crude oil price retreated to -0.6% to settle 72.04 Friday, the second consecutive day of fall as USD recovered after substantially weakened against major currencies in the past week. On weekly basis, the October contract reached 73.16 the highest and gained +4%. Recent rally in crude oil has been determined by movements in USD and stock markets, rather than fundamentals....Read the entire article

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Crude Oil Rally May Be Tempered By Housing Numbers

June crude oil was higher overnight and posted a new high for the month thereby renewing the rally off April's low. Stochastics and the RSI are overbought, diverging but are turning neutral to bullish signaling that sideways to higher prices are possible near term. But worse then expected housing numbers this morning have demand concerns looming again and this may be enough to take us back to the 54-55 range that so many professional traders are calling the new bottom.

If June extends this spring's rally, the reaction high crossing at 65.00 is the next upside target. Closes below the 20 day moving average crossing at 54.72 are needed to confirm that a short term top has been posted.

Tuesday's pivot point, our line in the sand is 58.79

First resistance is the overnight high crossing at 60.48
Second resistance is the reaction high crossing at 65.00

First support is last Friday's low crossing at 56.07
Second support is the 20 day moving average crossing at 54.72

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The June Dollar was lower overnight and trading below the 75% retracement level of the December-March rally crossing at 827.50. Stochastics and the RSI are oversold, diverging are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 10 day moving average crossing at 82.90 would temper the near term bearish outlook in the market.

If June extends the decline off April's high, the 87% retracement level of the December-March rally crossing at 81.49 is the next downside target.

First resistance is Monday's high crossing at 83.33
Second resistance is the 20-day moving average crossing at 83.99

First support is last Wednesday's low crossing at 81.98
Second support is the 87% retracement level crossing at 81.49

Today’s Stock Market Club Trading Triangles


The June S&P 500 index was higher overnight as it extends Monday's rally above the 10 day moving average crossing at 904.53. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term.

For Tuesday day traders will be looking at two unfilled gaps. 924.75 to the upside and 882.25 to the downside. Everything looks bullish today so look for traders to go long over the daily pivot point with the first round of selling at the half gap fill 916.50. We may be looking at a double top if the bulls take us to the 924.75 area and beyond.

This morning's housing numbers may have a different idea as stocks like the XHB [homebuilders ETF] are reacting negatively to the numbers in pre market trading.

If June extends this week's rally, this month's high crossing at 929.00 is the next upside target. Closes below the 20 day moving average crossing at 886.33 would confirm that a short term top has been posted.

Tuesday's pivot point, our line in the sand is 902

First resistance is the overnight high crossing at 915.80
Second resistance is this month's high crossing at 929.00

First support is the 20 day moving average crossing at 886.33
Second support is the 25% retracement, this spring's rally crossing at 862.80

The June S&P 500 Index was up 7.80 points. at 914.90 as of 5:59 AM CST. Overnight action sets the stage for a higher opening by the June S&P 500 index when the day session begins later this morning.