Markets are set up for a push higher. If we filter all the noise from the market commentators the charts are still attempting to put in some upside. The challenge has been, and continues to be Europe. There is no simple solution to the financial situation relative to the banks and sovereign debt. The meeting later this week will not resolve anything, but it will do one of two things… first, it will lay the ground work for progress to be made on how the European Union and the euro will survive, and under what format the bailouts will be structured to the likes of Spain. Second, it will become clear that no progress can be made on an orderly solution relative to the EU and the euro. or how the bailout will be structured for Spain and others. This is a key meeting and there is plenty of tension heading into the meeting. That said, the focus in the US markets, is and should be on the end of the quarter and earnings.
The housing data provide a lift for the broad indexes on Tuesday and now comes the challenge of following through on the move without Europe stealing the headlines yet again. As I wrote in the note yesterday the S&P 500 index did bounce off the support near 1305. If we can hold the bounce and produce some positive momentum a short term rally may erupt. You can review the Watch List and get the details of the upside sectors and indexes we are willing to put into play on a follow through to the upside short term.
The housing data showed prices stabilizing and in some markets rising. That is a breath of fresh air for the markets and the economy. If the bottom is in for the housing sector the long term healing process for the US economy can continue. The homebuilders have been doing well over the last six months, but have stalled of late on the economic data showing a slowing in the US economy. XHB, SPDR Homebuilders ETF rose 2.1% on the news Tuesday and bounced off support at the $19.20 mark. This remains one of the sectors to watch in the second half of the year.
The consumer confidence number fell short of expectations, but the sector rose 1.2% as the retail sector showed some positive movement equally bouncing off support. The consumer is a key part of any movement in stocks. The consumer has to be willing and able to spend for the US economy to work. That means jobs, housing and corporate spending all have to equally contribute for the market to take the next step.
Be patient and take this one day at a time as we watch to see if the upside can materialize short term. The video update and notes from last night break down the details of how and what opportunities we are watching moving forward. If you didn’t get to review them yesterday take the time to log in and review them today.