Market Fades Back into Inverted Hammer

Retail Sales came in better than expected for May indicating that consumer spending continues to hold up in spite of higher Energy and Goods prices. The economic numbers once again underscore my theme for the year, that we are not in a recession. However, we are not rip-roaring bullish either. In fact the market posture is IT Bearish, but today's price action may give us a short-term bullish bounce. I'm not expecting a huge move, so I'm not ready to get loaded up to my eyeballs in calls And I'm not expecting a change in the intermediate term (IT) posture because all the concerns that were bothering the market yesterday are still concerns. So look for a possible short term upswing for a couple of days, although we may just get a Harami today. I think the market probably won't gap and fade this morning, I think the bears are a little nervous about the short-term swing being a little too done. We may see some short-covering push the SPX back through 1,350, at least for the morning.

7:30 am MT: I sold the last of my DIA, SPY, and Q's puts at the market, at the open. Retail stocks like WMT, BIG, DLTR, ROST, and TIF may bounce a little today. In addition, Chemical stocks like AGU and TRA, and Coal stocks like CNX and ACI may be worth watching today or tomorrow. Some Tech stocks like RIMM and AAPL may be worth watching a little as well. I don't have a huge bullish list right now because of the market conditions.

Here are the final numbers on the DIA, SPY, and Q's put trades: the DIA was a gain of 7.5%, the SPY was a gain of 7%, and the QQQQ was a gain of 5%

I am still working through the cold that I caught two days ago, so I am posting this link and then resting for a little bit. You will be able to comment to each other as usual. I will be posting again in several hours.

11:30 am MT: The market has been pulling back for a couple of hours. If the SPX holds the low 1,340's and bounces intra-day, then the market may be signaling that the short-term downswing is over and a short-term bounce is in play. I want the Bull Flag on the 60m charts to confirm. I don't know if the market has enough strength to give us an Engulfing Day or not, we shall see.....

For now I'm still not playing anything. Retail, Financials, Transports, and Housing are leading the way. The Financials move is more of an "oversold" bounce. I think there are so many oversold areas that this bounce in the market may have legs for another couple of days. The problem is that all the most bullish sectors (Energy and Commodity related stocks) are bearish short term. So there's not a whole lot to play just yet. I'll run up and down my watchlist a few more times to see if anything shakes out.

A good stock to keep on your front screen today is AAPL, which is right on its 50dma, and close to horizontal support. It's hard to imagine a rally starting without Hot Money piling into AAPL. So it may be a good litmus test for the rest of the day. Right now, I'm skeptical.

1:55 pm MT: The market faded back to the lows of the day before bouncing towards the close. The result was an Inverted Hammer on the Dow and SPX, and no confirmation of a swing bounce yet. The Naz is a little more precarious as it battles on the wrong side of the 50dma. If we do get a bounce tomorrow then I have a very short list of stocks I'm looking at: CMI, ETN, QCOM, PX, MA, and maybe WMT. I may add to the list later today if I see some things I like after going up and down my watchlist a few more times.

8:45 pm MT: Market Wrap: The market pushed up on the Retail Sales report and some short-covering/bargain nibbling on Financials. An early drop in oil prices helped the bulls as well. Later in the day, oil rallied, which is sort of the "Anti-Market" or in other words, it's the anti-consumer spending/anti-retail effect. So back down the market went. My thought for tomorrow is that Financials are getting pretty overbaked on the short-term, and maybe we saw the first volley shot of a relief bounce today. If the CPI reports modest inflation numbers, oil prices drop a little, and Financials catch some more short-covering, then the market may bounce, and I will look at CMI, ETN, and QCOM (and perhaps a few others) for 1-2 day call trades. If the market fades again, I may play puts on index ETF's.

Here is a list of interesting bullish stocks (if we get a short term bounce):

CMI, ETN, JOYG, QCOM, ADBE, WDC, RIMM, PX, AGU, MA, CLF, STLD, WMT, DLTR, and ROST

If the market collapses then I will look at DIA, SPY, IWM, QQQQ, and perhaps some other stocks for puts.

I'm not entirely sure if we get the short term bounce tomorrow, but I'm leaning that way. However, remember that the intermediate term trend is down, so I won't be playing calls for more than 1-2 day swings. And I will keep an eye on any downtrending stocks that swing up for potential put plays, perhaps by late Monday or Tuesday of next week. We shall see.....