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SP500 Update: 2nd Half of June Behaving Like 2nd Half of Nov. & Aug. 2010 |
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By John Bougearel
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June 27, 2011
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Key Observations:
- The18 day decline from the June 1 high into June 16-27 is very similar in time and price to the 18 day decline into August 31 2010 and the March 17 2011.
- The decline in August bottomed on Consumer Confidence (CC) Tuesday August 31. The decline into Monday Nov 29 bottomed one day before Nov 30 CC Tuesday. The decline into Monday June 27 is one day before June 28 CC Tuesday. The multi-day bottoms hammered out on June 16-27 is similar is similar to the multi-day bottoms hammered out in Aug and Nov 2010. What is different about this bottom is 1) QE2 is ending and 2) the earnings season is only 3 weeks away rather than 6 weeks.
- The high in May was set on May 2 ISM. The high in June was set on the June 1 ISM. A rally from a June 27-28 Consumer Confidence related low into Friday's July 1 ISM report and/or possibly into the mid-July earnings season seems most probable. Because the July 1 ISM is going to confirm the economy is slowing and because the July 8 NFP report is going to confirm that job growth is below baseline expectations, a rally into the July 1 ISM report could dip into the July 8 NFP report before rallying into the mid-July earnings season.
- If an end of month rally into this months ISM report is similar to the end of month rally in May, we should expect a rally into the July 1 ISM report to reach approximately 1301.
Summary:
This is a good week to adopt a neutral to upside bias in the SP500 with all trading above this multi-day bottom low forming around 1260. A rally on Monday will run into downside momentum by 1280, and this downside momentum can be expected to push the SP500 back down into Tuesdays CC report. After the CC report the intraday bear momentum should relent as long as 1257-1260 holds. If the intraday bear momentum relents, then reaching 1300 by the July 1 ISM report should be not too difficult to accomplish.
But the ISM report that confirms a slowing economy on Friday will be reinforced and amplified twice in the following week: once on Tuesday July 5 ISM services report and Friday July 8 NFP report. The NFP week will thus be the digestive week ahead of the mid-July earnings season.
 Click on image to enlarge!
For more from John Bougearel, visit Structural Logic |
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