RealMoney

U.S. stocks again gave up early gains and finished Wednesday lower. And Europe was the culprit, as the European Central Bank (ECB) is reportedly holding off from using further stimulus tools for the time being.

Materials and energy stocks continued to lead the way lower, while consumer staples names held up relatively well. Gold and crude oil prices continued recent declines, while the Dollar index (DXY) rose for an unprecedented 13th consecutive session.

Retailers J.C. Penney (JCP) and Abercrombie & Fitch (ANF) were among the big losers on Wednesday. The stocks fell 19% and 13%, respectively, after giving weaker earnings outlooks. On the other hand, another retailer, Citi Trends (CTRN), moved 15% higher after posting strong quarterly results.

Looking ahead to Thursday morning, retailers Advance Auto Parts (AAP), Ross Stores (ROST) and Wal-Mart (WMT) will headline the earnings calendar.

Stocks are hovering around flat, but the credit market is trading very poorly. Bid-wanteds in cash are rolling in, especially in the go-go financial names. High-yield is down =BD point, which is normally what you'd see with the Dow down more like 100 points. This is after high-yield opened UP =BD point. Healthy markets don't act like this.

Markets filled the opening upside gap but can't get any momentum below yesterday's Low of 133.13—low of the day is 132.95---  I still say the healthiest action would be downside acceleration!

Commodities tried bouncing but there was no real power and are starting to roll over after my morning note.

1318-1322 is the level I've been pounding the table on! Measured move is 1295-1305 from the Head &Shoulders top!

Congrats to those who stayed short AAPL- it is now below the $547 target-  I would cover some and trail some with stop at 551.75

The level I will look for a macro buy – or tactical depending on the market is $520-$526  100day $524

At this point it s a bit dangerous to short-  so I'm done playing that game!

I would love to be a scale down buyer from SPY 132.20 down to 130.50 especially if we see that today.

I guess I will have to buy some SPY if we flush and come back above $133.13 as well if my lower levels are not met.

Banks are pressured as MS is the culprit today it was first to go negative

JPM 35.76 is the pivot that guys are trading against.

P.S I think most think GREECE is gone- even if they say there want to keep them in the Euro Zone

Also the fed minutes hinted at QE3- but that's losing some support as well

Roger did a great job talking about the minutes. What is fascinating is the

comments about 'ready to do something if the recovery falters' is something that

has been present for at least 2 1/2 years. Regardless of the swaying Fed

opinions to 'do or not to do' the consensus has not changed in that period of

time. Frankly, it won't change much unless/until the economy is out of harm's

way. I don't know when/where that might be but clearly we're not there yet.

The Fed minutes from the June meeting will be much more interesting to read

(just after July 4 I believe). as the discussion will likely be more than just

monetary policy.

...now at 1.75%...8 basis points above the record low

The minutes are 25 pages long versus 9 for March and 31 for January. The

FOMC meets every 6 weeks, so some months have no meeting.

Referenced strong growth in Commercial and Industrial Loans at US banks.

As a note, and I will write about this in a column more fully, C&I loan

have been increasing for the past year but here has been little indication

of using such funds by publicly traded companies. So, there is lots of

speculation about what's going on. There is some evidence that the

expansion in C&I loans is attributable to private companies working in the

tar sands and shale oil / gas infrastructure projects.

No quantitative easing discussed by name, but one member of the FOMC, not

identified, voiced an opinion of the necessity for "additional balance

sheet actions" (QE) to "mitigate downside risks to economic growth" in the

near term.

Participants cited several factors that would likely continue to restrain

the pace of economic expansion over the projection period. In particular,

tighter fiscal policy seemed likely to impart a significant drag on

economic activity for a time. Moreover, uncertainty about the fiscal

environment could hold back both household spending on durable goods and

business capital expenditures.

more to follow ...

On Wed, May 16, 2012 at 2:07 PM, Roger Arnold wrote:

> ... http://www.federalreserve.gov/newsevents/press/monetary/20120516a.htm

>

> I'll review and comment in a little while...

>

. have turned out to be the retail investors/traders, deciding the market

was crooked beyond repair, refusing to fund their IRA with equities and

choosing to sit out the 1st quarter rally.

... http://www.federalreserve.gov/newsevents/press/monetary/20120516a.htm

I'll review and comment in a little while...

Adding it to my watch list yesterday, was feeling the action compared

to the down market. Getting some big follow through today. Looking

around for news, but with the action the last two days something has

to be up.

Some decent movement in the railroad group today. One of the best-looking charts, in my view, belongs to Union Pacific (UNP). Good fundamentals to boot.

It's been consoidating gains since early February and is setting up nicely for a potential move over a swing point of $116.14, its May 3 intraday high. Of course, a successful breakout will need insitutional buying. I'll wait and see if big investors come into UNP soon. If they do and UNP takes out the swing point in heavy volume, there's your buy.

Markets are bouncing today as headlines about wanting to keep Greece in the eurozone are floating around.

I think that won't happen, but for today, we are oversold enough for a bounce-type day.

We are also seeing enough participation from the beaten down commodities that were all a lot lower this morning, when we mentioned covering some shorts and looking for a tactical long. For example the low of the morning for GLD was $149.38 -- right above the major pivot from Dec. 29 of $148.27-$149.63, yesterday's pivot was a nice spot to base action on. I guess it can get a bounce if it continues to $152-ish.

Traders came in with "a little short" on the brain, and the market didn't pull in during the first 60 minutes. This typically is not the way major tradable bottoms are set, but I guess we are down enough from the highs to have shorts on their toes and some market participants dipping their toes in to buy the dip.

Google had a nice move through $617 (tight pattern; I've listed that chart many times in "Off the Charts"). The stock has been acting much better since the Facebook comparisons have been rolling in. The market cap of Google is around $200 billion. Depending where Facebook opens, it will be pretty close to that.

Apple tried to break yesterday's low but held.  I covered and will let it settle out. $551.62 is a micro level to watch today. (It is lagging a bit today.)

Amazon has a nice pattern. At some point, it might a get a same move of Google (i.e., through $230-$232). It's on my radar (probably not today).

Not much else to talk about: Lots of bounces across the board as things have been beaten.

The SPY high of the day is $134.55 -- above this, and the resistance gap starts at $135.05 and gets filled up to $135.50. Then, the major area for Bears to defend begins at S&P 500 1360-1364.

If you are uncommitted to longs today, use the morning low of $133.75 SPY as a stop. If we fail later in the day, the next point of reference is $133.13 then 131.80-132.20 has been the target.

P.S. -- I am trying some tactical longs here, but I'm not sold that yesterday's low is the low of the corrective phase. Keep the powder dry. All depends on your time frame.

Not an easy environment.

I will take the liberty of putting the gun to my head and saying I think today the pattern changes.

why? oils and materials trying to play the oversold rally today.

After a crummy session for stocks Tuesday, major averages are still in search of Day 1 of a rally attempt. It sure would be nice to see gains hold today with a finish near highs in strong volume. The market could use a day of strong technical action, but even if we get it, it doesn't mean it's time to start putting cash to work.

Home builders continue to be the bright spot in the market. Many continue to be accumulated. Be sure to check out my Real Money Pro piece today with my take on the best-looking chart in the group right now.

Still seeing a lot of damaged charts in my screens that will need more time to repair. Until bullish technical setups present themselves, I'm in no rush to buy anything here -- not when the market trend is still downward

Good to see GE Capital resume its dividend to its parent. This should

provide the ammunition for GE to boost its dividend to at least 4% to its

shareholders, means regulators are good with the progress at GE Capital to

allow this to occur, and should provide a boost to the DJIA on the margins

as GE is a core component of the index.

Positions: Long GE

Link: http://www.cnbc.com/id/47443968

Royal Dutch Shell (RDS.A), Korea Gas, Mitsubishi and PetroChina (PTR) are

planning a large LNG export facility on the West Coast of Canada. Like the

United States, Canada is harvesting shale and associated gas in record

quantities. RDS.A has a 40 percent investment, while the others own 20

percent each.

Related, Asia LNG spot recently traded for a record $18.00 per MMBtu. In

comparison, Henry Hub is approximately $2.50 per MMBtu.

... in the premarket following the April construction report indicating

starts are up above expectations... TOL, LEN and HOV, are up 1, 2, and 6%

respectively... with media commentary again suggesting such validates a

housing rebound... be very careful here... as there is a con game afoot

with the money centers creating and artificial scarcity by way of refusing

to foreclose on non-performing loans... as I discussed last week...

http://realmoney.thestreet.com/articles/05/11/2012/housing-cannot-recover

The numbers cited in that column come straight from the bank quarterly call

reports and indicate that there are several million homes wherein the

mortgagor owes more than the house is worth and is not making payments.

Driving home building and values up by manipulating supply does not mean

that mortgagors will start making payments again. More troubling though is

that the demand for homes being met by builders is removing demand for the

homes that are being kept off the market; which actually makes the negative

equity issue greater and longer lasting.

This is not too dissimilar to the way De Beers manipulates the diamond

market by stockpiling in warehouses.

... Oil company shares up... I don't understand what's driving that

dynamic... All major oil companies worldwide are up with Norway's Statoil (

DNQ.DE) up almost 40% today...

... another 15% in the premarket even as TGT is up 2%... although the

markets are indicating a belief that JCP's woes are unique to them I would

note that Chinese exports of textiles, shoes, clothing, and apparel was

stagnant in April... indicating that buying activity for summer shelf

stocking by retailers is also stagnant...

...1-3% on average on relief that decisions about Greece have been kicked

for a month... hopefully anyway... it is still possible that Greece runs

out of money before they have a government in place... For today the

European relief rally should be extended to the same for US banks... and

they indeed are performing equally well in the pre-market...

I was not a fan of the stock pre-earnings, and am still not a fan

having sliced and diced the numbers pre-earnings call. We have a

twofold issue here. First, the U.S. business is underperforming

others in the mall on a sales basis, despite a more promotional

cadence. Two, the economics of the European business continue to

erode on a quarter to quarter basis, yet the company is full steam

ahead on new openings (which weighs on margins even more near-term).

I think the market is correct in bidding the stock down pre-market.

The 2pm FOMC minutes will be the day's focal point, with bulls hoping that

Big Ben will back up the helicopter and save the stock market. While there

was no QE3 implementation in the April meeting, market players will be

looking at the depth of discussion on the issue, and consider the odds for

free money at the June meeting, which (drum roll please) will come just two

days after the Greek elections.

Appears CITIC Securities in China (largest investment bank by market cap) has purchased the algorithmic platform of Progress Software. I'm not sure if the Chinese are new entrants into the world of HFT but as we can plainly see this technique is not going away. While the laws in the U.S. may change don't expect that to have much effect on how others outside our borders trade and what platform is used.

Here is the link to the story.

...back over 30% today. The financial media have focused on the Greek government turmoil. However, I will reiterate that the new French President hands are also effectively tied until after the legislative elections June 17. The Greeks know this too and have tentatively scheduled their next national election for the same day. This will probably provide enough political maneuverability by all required to keep Greece liquid and solvent until those elections are completed. Any actions Hollande takes on anything between now and then could cause the legislature to shift far enough right that Hollande is a lame duck from the start of his tenure. He isn't gong to risk that on Greece.

Excellent article on the numerous impacts to Greece and Europe if the

country has to leave the European Union in Bloomberg this morning. It is

not hard to see why our market is being dragged down by this crisis and why

I don't think we can stage meaningful rally until the mess in Europe is

resolved. U.S. Dollar should continue to benefit and financials should

remain weak as well.

Positions: None

Link:

http://www.bloomberg.com/news/2012-05-15/europe-must-face-ugly-reality-o...

As I was reading Doug K's diary Tuesday I ran across some of the best comments

about this current market and the saga we are in, bears repeating. Some day

it'll change but for now, play it to give yourself a chance.

Unnatural

May 15, 2012 | 3:51 PM EDT

* Tough game.

The market acts so badly that it is probably a buy now, but as I see it, a

limitation of natural players (who are now increasingly worn out) leaves the

casino in the hands of the algorithms and high-frequency traders.

So, in essence, short trading becomes a guess on the direction of those

programs.

Tough game.

Overseas Headlines continue to control this market as seems the foot that keeps kicking this can down the road is getting a bit Fractured.  The language of Europe muddling through the mud has turned more into sinking in Quick Sand ever since leadership was voted out in France and Greece snubbed all those that bent over backwards for them. 

Technically this market has been broken and a "Sell" since May 3^rd and 4^th.   This correction has been characterized as "slow" and "methodical"  in order to get a "sustainable" Bottom you need acceleration and Fear!  Markets have been working lower and are getting closer to the Macro targets I gave high probability of reaching a few weeks back.  The McClellan Oscillator is around -50- which is oversold but not extreme like we usually see to get multiday bounce type moves- this typically happens around -70-85

 Yesterday's pivot low is the first spot to watch today 1328  ( We could get a juicy Red Dog Reversal soon that actually might last for more than a few hours)  This Strategy can be used for Multiple stocks today as lots are almost ready for a small counter-trend tactical move!

1318-1322- is the 38.2 Fib retracement  --IF we see this today- I think you are playing with fire if you don't cover shorts here if you didn't already!

1295-1305 is the Measured move of the Head & Shoulders pattern that triggered as when we closed below the 1360-1365 Neckline!

 Resistance stands at the prior pivot area of  SPX 1343-1345-  with a bigger zone at  SPX 1360-1364

 Commodities have been broken most of this year and continue to get crushed.  At some point this will be a positive for America- 

Gold/Gld is approaching the pivot low from late December- there could be some action today in that zone- $1,523- GLD 148.27 if you've been short this metal (Nice Job)  and if you take trades along the way, this could be a spot to cover or look for some type of cute long!

September 6^th was the Outside day that marked the High($1,900ish) for Gold and 2/29 was the day the intermediate Downtrend took control!  The Macro trend also seems to have broken with bigger support down around $GLD-140--  So know your time frame.  Gold hasn't had an identity this entire year!  So it's been more technical.

 COAL/solar names have been in liquidation mode as they have been the weakest groups all year.

 The Key to making money in this tape is to Know your time frame and know what your good at...  Quick tactical trades are working and staying net short for lower targets in this Corrective Phase!  Longer term guys also can't be so upset if they have a multi-year approach as we are only about 6%ish off the highs.

It seems as if only a couple of days ago we were toying with 1340 on

the S&P 500.=A0 Now, the S&P 500 has closed below prior 1340 support,

ditto the Nasdaq below 2900. The NYSE is around its 200-day. I can't

help imagining a fast melting ice cube when thinking about the market

this morning.