Dr. John Faessel's  Instablog

Monday - pre market - 6-11-2012

Dr. John L. Faessel

ON THE MARKET

Commentary and Insights

Quote of the Day

[Building a European Union superstate] "will seem in future years to be perhaps the greatest folly of the modern era."

Margaret Thatcher

British Prime Minister

In 2002

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Short Covering Rally Balloons Market\

The Euro gave up the bulk of last night's gains following the Spanish bailout. Gapping higher to $1.2669, it's now only up +0.3% to $1.254. S&P 500 futures are also retreating off their highs and have given up about 60% of today's early pop - currently up 4.9 pts. One of the troubling aspects of these rolling bailouts is the reflexive surge in the Euro - not what struggling continental economies need.

The McClellan Oscillator (my favorite measure of overboughtness or oversoldness) is in 'high' neutral at minus 138. Bullish sentiment is at lows of the cycle. (See below)

Conventional interpretation of Stochastic is that the Fast is in overbought territory (SlowK is at 86.39); this indicates a possible market drop is coming. The "tilt" of the highs and lows channel in the Stochastics is decidedly bearish creating a bearish divergence. The long term trend is DOWN. SlowK is showing the market is overbought. Look for a top soon.

Last week the stock market took off on a hot short covering rally and was up about 3.6% for the week. Once it became evident that Spain would be bailed out the shorts ran for cover. It appears once again that the can has been kicked farther down the road. Now, presumably the market will focus on Italy and its woes. Economic overview of metrics in Euroland is ghastly with the graphs showing hellish trends. If you can stand the pain ― check John Mauldin / Weldon's Money Monitor Macro-EU: The Solution Illusion - link at:

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2012/06/04/macro-eu-the-solution-illusion.aspx

I think we go lower again.

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The S&P 500 (SPX) closed Friday at 1325.66. One-week ago it was 1278.04

Short term price support is at 1307

Stronger 'Price' support (the lows last Monday) in the (SPX) is at 1266 and will be the battleground zone as the market tests its lows.

The 200-day moving average resistance is at (SPX) 1288

50-day moving average resistance is at 1356.

Short term 'price' resistance is at (SPX) 1283 / 1288 / 1293.

Stiffer resistance is at the recently posted cycle highs of 1335 established on 5/29/2012.

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EuroLand Bond Yields have cooled with the Spain Bailout

Greek 10-year yields 27.32%

Italy 10-year (gross) bond yield - 5.86% - off from highs of 7.29% on 11-24.

Spanish 10-year (generic) bond yield - 6.26% - off from highs of 6.7% on 11/24.

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Friday's key indicators and metrics:

Cycle highs or lows are in red

· McClellan Oscillator is in 'high' neutral at plus 138

· Euro - 1.2507

· Copper - 3.2850

· The Treasury 10-year yield 1.6737%

· The 30-year Treasury is at 2.765%

· US Dollar Index - 82.56

· VIX - 21.23

· CBOE Put / Call Volume Ratio - 0.96

· 3-month $ LIBOR at 0.468

· Crude oil (NYMEX) $84.10

· Brent Crude $100.51

· Natural Gas (Globex) 2.299

· Silver (COMEX) 28.471

· Gold (COMEX) $1590.1

· Aussie Dollar - 0.9898

· Japanese Yen 12584

· Swiss Franc - 1.0415

· Canadian Dollar - 0.9715

* This week's Bullish Investor Sentiment is now once again near new cycle lows.

(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)

· The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS fell a couple of ticks to 27.5% from 28% the prior week. The lows of the cycle were ticked 4-weeks ago at 23.6%. It had posted previous lows of the cycle at 25.3% in September 2011. It was 42.4% just ten-weeks ago. For perspective January 2011 it ticked its highs in Bullishness at 63.3

· The Market Vane (Market Letter Survey) fell to 50% from 54% the prior week. It ticked Bullish cycle highs of 69% 3-months ago. In 2007 it ticked high of the cycle at 75% BULLISH.

· Consensus Index BULLISH investor sentiment fell another couple of ticks to 47% from 53% the prior week. Cycle highs of 78% were reached 3-months ago. In September 2011 the Index registered cycle lows of 28%.

· The AAII Investor Survey of BEARISHNESS rose to 45%from 42% the prior week. 4-weeks ago it was 46%. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness. Late December 2010 it was only 16% Bearish.

· The Citigroup "Panic / Euphoria" Model slipped again to a minus 0.31 from 0.27. Four-months ago it registered cycle highs of a plus 0.31.

The BARRON's Confidence Index posted a 68.4 from 67.7 the previous week. Just over 3-months ago the index posted cycle lows of 66.9. One-year ago it was 77.7.

The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.)

The Index is the High-grade bond index divided by intermediate-grade index. A decline in latter vs. former - generally indicates rising confidence, pointing to higher stocks.

For my Best Ideas for 2012 please send an e-mail request to: Dr.Faessel@onthemar.com