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The stock market bounced on 6-14, but the very early action on 6-15 suggests that investors remain unsure as to what lies ahead.
Chart Courtesy of StockCharts.com
The S & P 500 survived a test of its key support area near 1260, its 200-day moving average on 6-14. And what happens next is anyone's guess. What's important is that, as investors, we understand where this index could run into trouble or be successful. The key resistance levels right now are in the 1300-1305 area, near the 20-day moving average, while support remains near 1260, the 200-day moving average.
There are too many crosscurrents at this time. And thinner than normal volume because of the summer may make volatility more prevalent. There is just no way to trade this market for now, which means that standing aside with lots of cash, or being well hedged with both shorts and longs to offset one another are the only viable strategies.
Chart Courtesy of StockCharts.com
The market's breadth remains negative. On 6-14, the Nasdaq Advance Decline line (NAAD) improved. But over the longer term, the line is still making lower highs and higher lows. That means more sellers than buyers. Until that changes, and the market can prove that it can take out overhead resistance, this remains a tough market to trade consisently.
Chart Courtesy of StockCharts.com
Finally, it's important to keep an eye on inflation. As the stock market has wavered, the CRB Index (CRB), a widely watched index of commodities, has remained very steady. Despite falling oil and volatile metal prices, grains and other commodities such as corn, cotton, coffee and sugar, have remained steady, accounting for the CRB's middling action.
Inflation is not by any means under control. It's just not out of control. But weather and the global economy are the keys to commodity price movements. Even if there is little economic growth, the weather picture, ie. drought, flood, or whatever the winter brings, could have significant influence on the agricultural side of the commodity picture. Any negatives there, in our opinion, are the wildcard.
Tales From The Road: College Station, Texas - A Cautionary Tale
What a difference a year can make.
Over the last several years, in our "Tales from the Road" series, we've highlighted one fact; smaller cities in the U.S., with colleges and universities as the central cog in the economy are doing well.
We have to report that this is starting to change, for the worse. We spent the last five days in College Station, Texas, home of Texas A & M University. This is where the top layer of junior tennis in the state meets for the annual Sectional tournament. It's usually a well attended tournament. We've participated for the past 4 years, and have a fairly good feel for the general economy of the city.
This time around, it was clearly a subdued event. The streets of the town were not as crowded. Granted, this is summer in a college town. But, in past visits, that hasn't mattered. Events, such as the "Slam" usually keep the restaurant parking lots full and the hotels sold out.
Over the time we were there, we had no trouble getting a table at any restaurant. And even the hotel dining room was sparsely filled during breakfast.
Familiar faces at the tournament, were still there. But many of the executives, ie. hedge fund managers and lawyers whose children play weren't there this year. Their kids played, but went with the other parent or coach.
We only saw a handful of tennis players at the mid-market restaurants we went to. We did see a couple of tennis mothers buying ready to eat meals at a supermarket, taking them back to the hotels.
The city of College Station hosted a concert over the weekend. But we didn't know anything about it, until we read the article about how the attendance dropped by 75% compared to last year's crowd, from 40,000 total attendance to 11,500 this year.
It's a hard call, to be sure. But, to us, it looks as if even smaller towns with well established universities, are starting to fell the pinch of this economy. To us, this is a highly concerning development, given the fact that up to now, these smaller places had been a bastion of economic strength.
More telling is the observation that tennis parents are starting to watch their pennies. This is an economically stout demographic. If the economy is hitting this group, things are indeed getting more serious than anyone has figured.
And when you factor in the negative reading on the just released Empire State Index of economic activity in the state of New York, you just have to wonder what's next.
We wrote a column about College Station on 6-14-2010. Read it here: http://www.joe-duarte.com/tales/2010_0614_tales.html.
Conclusion
The economy is worse off than many realize. Two pillars of stability may be wobbling. One is the university town. And the other is the upper echelon of professionals.
What we saw in College Station this summer is a stark contrast to last year's vibrant activity during the same type of event, a major junior tennis tournament with over 850 participants. For a town the size of College Station, that would usually mean filled restaurants, overcrowded hotel rooms, and busy main drags.
This was a bit of a shock. Frankly, we're worried.
We'll be on Twitter
some time today before the market closes with some updated comments.
Know when to sell and how to make money when the market falls. Get
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