Weekly Outlook

Click here for the Weekly Economic Preview by MarketWatch.

There are several economic reports of note and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. – Chicago Purchasing Manager, NAPM-Milwaukee

Tues. – Total Vehicle Sales, ISM Manufacturing, ISM Prices Paid, Construction Spending, weekly retail sales

Wed. – Challenger Job Cuts, ADP Employment Change, Factory Orders, weekly EIA energy inventory data report, weekly MBA Mortgage Applications report

Thur. – Change in Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, Initial Jobless Claims, ISM Non-Manufacturing Composite

Fri. – US markets closed

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. – H&R Block(HRB)

Tues. – Oshkosh Corp.(OSK), Constellation Brands(STZ), Schnitzer Steel(SCHN), Apollo Group(APOL)

Wed. – Family Dollar(FDO), Acuity Brands(AYI)

Thur. – None of note

Fri. – US markets closed

Other events that have market-moving potential this week include:

Mon. – None of note

Tue. – (TDG) analyst day, (CPB) analyst presentation

Wed. – None of note

Thur. – None of note

Fri. – US markets closed

BOTTOM LINE: I expect US stocks to finish the week modestly higher on a firmer US dollar, less economic pessimism, a bounce in emerging market shares, a bounce in financial stocks, bargain-hunting and short-covering. My trading indicators are giving mostly bearish signals and the Portfolio is 75% net long heading into the week.

Market Week in Review

S&P 500 1,278.38 -3.0%*

Click here for the Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices
S&P 500 1,278.38 -3.0%
DJIA 11,346.51 -4.19%
NASDAQ 2,315.63 -3.76%
Russell 2000 698.14 -3.80%
Wilshire 5000 13,019.88 -3.13%
Russell 1000 Growth 553.92 -3.01%
Russell 1000 Value 676.23 -3.21%
Morgan Stanley Consumer 648.60 -2.93%
Morgan Stanley Cyclical 859.97 -5.42%
Morgan Stanley Technology 559.64 -3.97%
Transports 4,909.12 -5.49%
Utilities 506.99 -2.29%
MSCI Emerging Markets 135.20 -2.69 %

Sentiment/Internals
NYSE Cumulative A/D Line 47,110 -8.26%
Bloomberg New Highs-Lows Index -1099 -67.8%
Bloomberg Crude Oil % Bulls 38.0 +31.03%
CFTC Oil Large Speculative Longs 211,137 +3.6%
Total Put/Call 1.11 -13.95%
OEX Put/Call 1.0 -30.07%
ISE Sentiment 112.0 +47.37%
NYSE Arms .90 -33.82%
Volatility(VIX) 23.44 +2.49%
G7 Currency Volatility (VXY) 10.11 +2.02%
Smart Money Flow Index 8,081.35 -3.55%
AAII % Bulls 31.25 -5.25%
AAII % Bears 52.27 +14.28%

Futures Spot Prices
Crude Oil 140.21 +4.08%
Reformulated Gasoline 350.12 +2.19%
Natural Gas 13.20 +.63%
Heating Oil 390.66 +3.69%
Gold 931.30 +3.16%
Base Metals 246.92 -.38%
Copper 387.80 +1.28%
Agriculture 483.47 +3.0%

Economy
10-year US Treasury Yield 3.97% -20 basis points
10-year TIPS Spread 2.53% +3 basis points
TED Spread 1.13 +18 basis points
N. Amer. Investment Grade Credit Default Swap Index 141.57 +17.97%
Emerging Markets Credit Default Swap Index 255.43 +7.05%
Citi US Economic Surprise Index +7.50 -39.0%
Fed Fund Futures 24.7% chance of 25 hike, 75.3% chance of no move on 8/5
Iraqi 2028 Govt Bonds 72.54 -1.18%
4-Wk MA of Jobless Claims 378,300 +.6%
Average 30-year Mortgage Rate 6.45% +3 basis points
Weekly Mortgage Applications 461,300 -9.26%
Weekly Retail Sales +2.4%
Nationwide Gas $4.07/gallon -.01/gallon.
US Cooling Demand Next 7 Days 5.0% above normal
ECRI Weekly Leading Economic Index 131.70 -.68%
US Dollar Index 72.36 -.92%
Baltic Dry Index 9,599 +1.81%
CRB Index 464.40 +1.98%

Best Performing Style
Large-cap Growth -3.02%

Worst Performing Style
Small-cap Value -4.47%

Leading Sectors
Oil Service +3.21%
Energy 1.31%
Drugs +.83%
Hospitals -.65%
Medical Equipment -.80%

Lagging Sectors
I-Banks -5.60%
Wireless -6.48%
Alternative Energy -7.58%
Airlines -10.52%
Gaming -11.40%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Lower into Final Hour on Surging Oil, Rising Credit Market Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Gaming longs and ETF hedges. I covered some of my (IWM/QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, sector performance is mixed and volume is about average. Investor anxiety is above-average. Today’s overall market action is neutral. The VIX is falling .5% and remains above average at 23.82. The ISE Sentiment Index is below average at 116.0 and the total put/call is very high at 1.18. Finally, the NYSE Arms has been running around average most of the day and is currently .98. The Euro Financial Sector Credit Default Swap Index is rising 2.72% today to 96.58 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is rising 13.5% today to 141.57, which is also a negative. The TED spread is rising 2.91% to 1.12. I still believe given record short interest, recent steep stock declines, high investor angst, quarter-end on Monday and the market’s technically oversold state, a very sharp rally will materialize soon. The heavily shorted financials are attempting a recovery, despite more negative news. Any upside traction in this sector should light a match under the broad market. A number of market leading stocks have been trading much better today and a number of sectors are rising despite losses in the major averages. Commodity, medical, road & rail, hospital, construction, hmo, drug, biotech and defense shares are all higher for the day. Nikkei futures indicate a +5 open in Japan and DAX futures indicate an +56 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, better economic data, quarter-end window dressing and bargain-hunting.

Personal Income Surges, Spending Jumps, Core Inflation Tame, Confidence Depressed

- Personal Income for May rose 1.9% versus estimates of a .4% gain and an upwardly revised .3% increase in April.

- Personal Spending for May rose .8% versus estimates of a .7% gain and an upwardly revised .4% increase in April.

- The PCE Core for May rose .1% versus estimates of a .2% increase and a .1% gain in April.

- Final Univ. of Mich. Consumer Confidence for June was 56.4 versus estimates of 56.7 and prior estimates of 56.7.

BOTTOM LINE: US consumer spending rose more than forecast in May as tax rebates drove the biggest gain in incomes in almost three years, Bloomberg reported. This data indicates that 2Q GDP will accelerate from 1Q’s 1.0% rate. Americans used their stimulus checks to buy electronics, clothes and furniture, according to the data. Economists at Morgan Stanley estimated 2Q growth at 1.6%, up from a prior estimate of a .8% gain. Disposable income, or the money left over after taxes, surged 5.7%, the most since May 1975. The US savings rate jumped to 5%, the highest since March 1995. About $70.8 billion worth of tax rebate checks were distributed through June 20, which leaves about $37 billion left to hit. The core PCE, the Fed’s preferred gauge of inflation, rose 2.1% year-over year versus the 20-year average of 2.4% and down from 2.5% in February of last year. I expect incomes and spending to exceed estimates again for June and core inflation to remain tame. The US Dollar Index is .08% lower and the 10-year yield is declining 3 basis points on today’s reports. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 2.55%, which is around the average for the last four years. This is also still down 13 basis points from 2.68% on March 13^th.

Bull Radar

Style Outperformer:

Large-cap Growth (+.04%)

Sector Outperformers:

Oil Service (+1.11%), Energy (+.89%) and Road & Rail (+.62%)

Stocks Rising on Unusual Volume:

GRS, HMY, SWC, KWK, PDO, BBL, AGU, HES, ASMI, CYMI, DLB, ANDE, HUSA, UMBF, NUVA, WTFC, GOLD, AAUK, ASTE, ATPG, NCTY, PAAS, FSYS, BABY, SHLD, DBTK, AREX, TSCO, AZZ, ACN and NAVZ

Stocks With Unusual Call Option Activity:

1) CFC 2) AEO 3) TWX 4) GLW 5) GW