AheadoftheNews.com

ISEE closes at 156. Bullish, but not yet frothy.
Yields on the ten year managed to stay below 4.9% at the close, but we are trading in the danger zone. The jobs report tomorrow will be key.

Futures traders watch support at the NQ March trendline, recently regained, now at 1925/1927. Should we actually get some real selling, 1912 is the new monthly pivot and 38.2% of the recent rally. Must hold. Resistance above 1936 is 1944/1945.

June 1 (Bloomberg) -- Chinese investors opened more than 420,000 new brokerage accounts on May 30, well above the daily average for the year, even as the government tripled the tax on securities transactions.

That sell-off was a joke, but a great opportunity for those who kept their cool.

Dell delivers. That is going to put a floor under PC chip makers.

They are going to close the COMP at or above 2600, that was the game plan all along. There is money to be made when shorts are shell-shocked. Last night, I mentioned that I love techs as no one believes in them and they are proving to be the most resilient group today.
DELL on deck later, futures could lighten up after the cash close in anticipation. I am not a fan of that stock, frankly.

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All time highs not far away (513). That stock, along with AAPL, is definitely what pushed the COMP above 2600 and it looks like it wants to stay there, at least today.

Noon update:
COMP 2600 holds. Oil drops the bid and falls below 62.90 support. Risk is to 62.50, 62.35 and 62. Below that, we would have a screaming buy at 61.45. Energy stocks are going to feel some pressure, but the TRAN is happy. The real shadow is financials and yields above 4.9%. That could be a problem once we are done with EOM plays (end of month).

YM (DOW future) has 61.8% April projection at 13702. We stalled at 13695, but don't discount a higher high before the day is over.

Mid-morning update:
Looks like the game is to hold COMP 2600. Oil gets a light boost but gasoline is weak, support is 63.35 and 62.90.

Keep in mind that we have DELL after the close.

May 31 (Bloomberg) -- Spending on U.S. construction projects unexpectedly improved last month, as work increased on non- residential projects such as hotels and factories even as homebuilding continued to slump.
The 0.1 percent increase followed a revised 0.6 percent gain in March that was larger than first reported, the Commerce Department said today in Washington.

This is putting pressure on yields. We could be seting up for some profit taking either today or tomorrow, unless of course the bond drop softens.

Yields just shot up above 4.9% on the 10 am news.

Construction spending at 10.

Bulls want to hold on to COMP 2600 at the close. Target is still 2640 in the coming days. Techs and small caps are leading the way as the rally tries to spread out.

May 31 (Bloomberg) -- The U.S. economy grew last quarter at a 0.6 percent annual rate, the weakest in more than four years, as housing slumped, the trade deficit widened and businesses reduced inventories.

May 31 (Bloomberg) -- The number of Americans filing first- time claims for state unemployment benefits unexpectedly fell last week, pointing to strength in the labor market.

This is exactly what the doctor ordered for the stock market at this point. Bonds catch a bid and yields drop. It's not much, but enough to keep hopes alive.
Gold breaks out above 10 dma resistance and it looks like it put in a bottom, should the dollar stay weak and oil not drop too much on inventories at 10.30. Support for YG August is 664.50, 663.50 and 662.
NQ double tops, but could very well break out to new highs, watch 1931.50. Resistance above that is 1935 and 1945/1948, although that would be a stretch after yesterday's rally. YM hit 13695, so my target for May has pretty much been hit, although I have it a little higher at 13701 and possibly 13713. A break above that has resistance at 13729. There could be some profit taking at some point.

Once again. MarketWatch proves to be the perfect contrarian tool ahead of the trading week. I noted the following on Monday:

"There is a bit of a sanguine tone out there in the press, with some big hedge fund players publicly crying out for a correction. Watch out. A snake is more trustworthy. My favorite contrarian indicator, CBS MarketWatch, is calling for more heavy selling this week. These guys pretty much always get it wrong, aside from Hulbert."

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Those that say techs have nothing new in the pipeline are just completely clueless. The next generation of computers will be revolutionary, including what will happen in your home. I am very bullish on the Nasdaq. We could see some weakness short term, especially on a hit and drop of 2640, but I have no doubt we are eventually going much higher.

POTSDAM, Germany (Reuters) - World powers, including Russia, threatened "further appropriate measures" on Wednesday if Iran failed to comply with U.N. resolutions demanding that it suspend nuclear enrichment.

This is an important story which should make oil a buy on pullbacks. In fact, we are settling the day right at 63.35, 38.2% 2007.

On tuesday, I mentioned the possibility of QQQQ getting up to 47.20 on the bullish COMP outlook. QQQQ high so far is 47.16. Shorts got clobbered by not respecting price. If you missed it, don't worry you are not the only one, at least from bottom to top. It was a very difficult day to trade today, but the VIX was under pressure and that foretold a rally.

Here we go, QQQQ just tagged 47.20. NQ is at 1923, just shy of 1925. It looks like we are headed for a challenge of the multi-year highs, but semis need to get back on board. YM target is still 13700/13713 for May, we are close.

Al time high close for SPX. Actual all time high is higher, but on a closing basis, we hit the record books.

The Fed minutes were bought, QQQQ runs up to 46.97. It's not a good idea to go short today unless you are scalping for quick points.

Mid-morning:
It looks like shorts will get squeezed once again. The oil bid could have been a give away, but in reality this bull market is not over and funds know it. If long, you should set your stops relative to SPX 1510.

Open:
The COMP holds 2550. NQ finds support at 61.8% Thursday/Monday (1888.25) and 76.4% last week (1887.25). Here comes a gap close attempt, which will find some sellers. Watch ES 1515. So far, no real panic.
If NQ can hold 1892.75 on a bounce, this could be all bears get for now.

SPX holds the 20 dma at 1510. For ES, it's 1515, although they did overlap a little.

Pre-open:
The selling continues. Nothing like February, but definite pressure. NQ lost 1900, but found support at daily S1 (1894.75). The Yen is down as traders seek safety in the dollar and US bonds.
This is going to be a tough day to trade as the drop in rates could be supportive but there is some fear. I would look at ES 1515 (20 dma) for clues. Crude oil is actually up.
In truth, the market is more concerned with the data coming out Thursday and Friday once the noise clears.
For techs, look at COMP 2531 and QQQQ 46.33 for support should we head lower. NQ weekly S1 is at 1882. should we lose 1893, 61.8% last week.
We have Fed minutes at 2PM.

May 30 (Bloomberg) -- Even if former Federal Reserve Chairman Alan Greenspan is right, the ``dramatic contraction'' he predicts for Chinese stocks isn't likely to infect the international economy.
That's the conclusion of a number of international economists and former government officials around the globe. They say China's economy shows little correlation with its stock market, and the fact that foreigners are mostly excluded from owning shares -- even Chinese participation is limited to less than 10 percent of the population -- means the effects of a bursting of the bubble would remain contained.
``This is a relatively small casino,'' said Edwin Truman, a former director of the Federal Reserve's international finance division and now a senior fellow at the Peterson Institute for International Economics in Washington. ``Even the implications for the Chinese economy should be minor.''

We are going to find out soon enough. NQ at 1899.50 support as I type. YM at 13500. ES 20 dma at 1515 will be critical as well.

May 30 (Bloomberg) -- China's stocks dropped from a record after the government tripled the tax on securities transactions, halting a rally that's made the shares Asia's most expensive.

This is creating a downdraft in US equity futures. Eventually, money could seek refuge in the US markets, still the cheapest out there (...scary), but watch overnight support, mainly NQ 1899.50/1902. Relative to weekly pivots, YM is weaker than NQ. However, this could change in the overnight session. A China sell-off is what trigered the February correction, so expect some real fear overnight.

Gold is up. Switching to August contract, gold bulls would like to see a move above 663.70, 50% 2007 (657.80 for the June contract).

May 30 (Bloomberg) -- Japan's industrial production unexpectedly fell for a second month in April as the slowest economic growth in the U.S. in four years reduced demand for Toyota Motor Corp. and Honda Motor Co. cars. Output will rebound in May and June, the ministry said, helping sustain the nation's longest economic expansion since World War II.

Watch JPY June pivot at 0.008248.

The COMP is building another channel with key support at 2539, should 2558 break.

As you can see, the 10 dma is struggling to get back above the 20 dma and that is what bulls need to achieve in the coming days. It's all about yields and the Yen.

The Yen is holding on to lows and trying to build a base. We are still at historical lows, but the trend could be up from here and traders need to put that on their radar. Building a long Yen position might be a good hedge going forward.
Yields on the ten year have gone up 13 days straight without a pullback. Risk could be to the upside for bonds in the short term.

Today's advance by QQQQ/NDX was tentative, but the close above 10/20 dma cannot be dismissed if it holds. Small caps put in an even stronger performance and are once again within striking distance of all time highs. The atmosphere is quiet in the press, no big drum beats, and that could be a reflection of the cautious to bearish mood.
Let price decide and see if NDX can get back above 1900 and in a decisive way. For SPX, the magic number is now 1522 and it needs a close above that to negate the bear flag. Careful.

Overnigh traders, watch NQ 1899.50, weekly pivot and new line in the sand. A lot will depend on the JPY moves. It's interesting to note that Japanese traders bid up the Yen when they are open and we drive it down during our trading session.

NQ closes above 1899.50, setting up a possible run to 1925 this week, or QQQQ 47.20. The COMP looks positively bullish if it can stay above 2566, or even 2558.

PM update:
After dropping 1900, NQ (NDX future) went down to test the 30 dma at 1891.50 and so far it is holding. The Yen caught a bid which gave us the selling. Both semis and financials are up. This market is building a trading range, but lows must hold into the close. NQ needs to end the day above 1898, Friday's highs.
YM is having a harder time due to the drop in oil and energy stocks. Gold is still positive, thanks to the weaker dollar.

Morning update:
Bulls would like XLF (financials) to stay above 37.74 at the close. It's tough with yields on the ten moving up to 4.85%, but all these M&A's keep the pump primed. Retail, housing, semis and financials are up, normally a healthy sign. Small caps are leading the charge with RUT back above the 835 critical level. But the real test is NQ (NDX future) holding 1900/1901 at the close.

May 29 (Bloomberg) -- An index of consumer confidence in the U.S. jumped more than forecast in May as rising stock prices and a resilient labor market put Americans in a mood to spend.
The New York-based Conference Board's index of consumer confidence rose to 108.0 this month from a revised 106.3 in April, a five-month low. The index averaged 105.9 last year.

Solid bid accross the board. NQ makes a higher high from Friday and tests 1909 resistance. Watch support at 1900. TNX is stalled around 48.72.

The markets are shaking off the rate hike talk, which I always thought was nonsense. Rates might stay where we are, or even go down, but the Feds are not about to raise rates. They are perfectly content seeing bonds selling and playing catch up.
Keep in mind that the bulk of economic data is coming later in the week. For now, we have a relief rally mixed with some short covering.

Gold has a nice bounce pre-open with YG tagging its 10 dma, still resistance since May 10th (currently 661.20, June contract). This is occuring even though oil and gas are down. Dollar weakness gets the credit (home prices). We await consumer data at 10.

May 29 (Bloomberg) -- Short sellers are betting against U.S. stocks like never before as the Standard & Poor's 500 Index approaches an all-time high. That's making some of the biggest bulls even more optimistic...The amount of shorting -- where traders sell borrowed stocks expecting to buy them back after prices fall -- jumped to 3.1 percent of the total shares listed on the New York Stock Exchange this month. That's the highest since at least 1931...Mergers and acquisitions increase the likelihood that short sellers will get burned, according to Robert Froehlich of DWS Scudder, which oversees $321 billion. ``Anyone that did the theory, `sell in May and go away,' they're going to wish they never read that,'' Chicago-based Froehlich said.

We will soon find out.

May 29 (Bloomberg) -- Japan's jobless rate unexpectedly fell to a nine-year low in April and households increased spending for a fourth month, suggesting consumers will help extend the economy's longest postwar expansion.

The Yen might have found a bottom. It's a buy now, the question will be how much against the dollar. If you are trading JPY June futures, resistance is 0.08261, support is now important at 0.8238 after the early test of 0.00833. The Nikkei could also be a buy, after some initial worries about exporters and a stronger Yen. The Yen is so low, that should not be a concern. The real concern for everyone is the US markets and interest rates.

The jump in the ten year yield to 4.9% spooked everyone, but let's put it into a perspective. The weekly chart shows that we are still in a trading band between 4.5 and 4.9%. The real danger lies above 5%, as we saw in May of 2006. If the economic data this week turns out to be benign, back down we go. Any sign of further economic strength and we will test 5% and possibly break out of the range. Fed watch is the wall of worry's favorite brick.

However, any short/medium term drop in yields will have to be put up against the longer term monthly chart which is on a steady uptrend since 2003. I have no idea what the Feds will do, but as the chart shows, a break above 5% is a much more serious affair than last year as we would push through triangle resistance and possibly drive up to 5.5%. That would pretty much end the equity bull market. We are not there yet, but always have that long term chart in mind. If we fall, look at trendline support, currently around 4.45%.

Daytraders need to watch bond futures like a hawk. They will dictate direction.

May 28 (Bloomberg) -- Metal and mining stocks rallied worldwide on speculation that growing demand for commodities and higher prices may fuel more takeovers in the metals industry.

This could help gold weather the current drop in crude. I liked the YG chart on Friday, but 653.60 (June) must hold.

There is a bit of a sanguine tone out there in the press, with some big hedge fund players publicly crying out for a correction. Watch out. A snake is more trustworthy. My favorite contrarian indicator, CBS MarketWatch, is calling for more heavy selling this week. These guys pretty much always get it wrong, aside from Hulbert.

The only overnight future's activity of note was a drop in oil to 64.40 from Friday's close above 65. Globex equity trading was predictably almost non-existent, but with a bullish bias. Volume will return this evening. Consumer confidence is on deck tomorrow at 10.

ISEE ends at 117, a pessimistic option read.

Bulls want to close SPX at or above 1514, but just holding the 20 DMA at 1507.50 was an important victory today. The housing numbers this morning quelled any nonsense about rate hikes. We need to repair some technical damage in techs and financials, so let's see if buyers regain more confidence on Tuesday. The wall of worry is alive and well.

May 25 (Bloomberg) -- Sales of previously owned homes in the U.S. fell unexpectedly in April to the lowest level in almost four years, dimming prospects for a quick recovery in housing.
Purchases fell 2.6 percent to an annual rate of 5.99 million last month from 6.15 million in March, the National Association of Realtors said today in Washington. The supply of homes for sale at the current sales pace rose to the highest since August 1992.

We will see if bad news now becomes good news. TNX drops to 48.55, NQ (NDX futures) closes the gap at 1882, which is must hold now. Resistance will be 1889.50, 1895.50 and 1899.
The main concern for the markets right now is to not have any news that will prompt the Feds to raise rates. Most have given up on a cut until after the summer, so that is priced in already. In other words, we could hold a rally on today's news.

Overnight bounce with 30 DMA resistance for NQ at 1889.50. We await the existing home sales at 10.

Japan is bidding up the Yen as some investors probably repatriate some funds. Bulls do not want to see this accelerate.

AMGN is helping NQ after-hours on a 3 billion dollar buyback deal.

Ugly day, that -2000 ADVDEC line was too heavy for bulls. NQ managed a close above weekly S1, 1977.75 after doing a double bottom off last week's low. SPX closes right above its 20 DMA (1506). SMH did a bounce off of Ocober 2006 high and that keeps techs alive.
Is this the end? Not necessarily. TNX dropped at the close and the Yen is still way down there, no panic buying to cover carry trades. We will most likely rally one more time, probably next week, in order to get the rest of the bears to throw in the towel.

It got ugly very quickly on the TNX 49 hit. SMH has key support at 36.15, must hold for chips. NDX/QQQQ also need to recoup ther respective 20 dma's. There is some relief as TNX drops to 48.77, but watch financials for clues (XLF). At this point, there might not be many heroes ahead of the weekend.

Key reversal day? TNX is killing it, now at 48.92. That needs to drop.

The tech sector is loking weak, but small caps are hanging on. NQ must hold 1905 at this point or the rally could easily fade. At least the Yen is dropping, but that is due to a stronger dollar and a scary rise in yields to 4.9%.

And we're off to the races. Someone just gave Greenspan the Bronx cheer...

Watch out for those yields, though. They just hit 4.9%. Danger zone. Nevertheless a nice squeeze as the DOW hits new all time highs. I still have a YM target of 13700/13713, so watch that if we go bezerk.

10:00U.S. new-home sales down 10.6% y-o-y
10:00U.S. April median home sale price down 10.9% y-o-y
10:00U.S. new-home inventory 6.5-months supply
10:00U.S. April new-home inventory falls 1.5% to 538,000
10:00U.S. March new-home sales revised lower to 844,000
Courtesy MW.

NQ tests the lows but holds the weekly pivot at 1901.75. YM does not even bother hitting the lows. Housing is up at 10, but the worst could be over if RUT can hold 835. Yields are climbing again as is the Yen.
Once we bounce, watch NQ and the 1905 level.
It doesn't get any easier than this. You shut out the noise and buy NQ weekly pivot. Stops should be moved up to 1902/1903, just under 10 dma, in case housing kills it.
Noting a bounce in FXI (China ishares).

Pre-open:
We could be building a stealth rally. Watch the Yen, a minor problem right now as the dollar weakens. The lows could be tested at the open, so draw your fibs from yesterday's highs. If overnight lows drop, do not chase this until we get back above the lows, or just go short. Just be aware of those weekly pivots. I still hold the view that they will rally into the weekend, but price is what counts, not opinions. Trade accordingly.

8:30 U.S. continuing jobless claims up 58,000 to 2.53 mln

Suppport holds for now with some tentative buying as we get a slight bid in bonds. It does not look very strong so use caution. But as long as NQ holds the area between 1901.75 and 1904.25, bulls have a chance to save the day.
Existing home sales at 10.

NEW YORK (MarketWatch) -- The dollar extended some of its gains against the euro and trimmed losses against the yen early Thursday, after a Commerce Department report showed new orders for U.S.-made durable goods increased 0.6% in April, above expectations for no change. Meanwhile, orders in March rose a revised 5%, a six-month high, compared with a 4.3% estimate previously.

So far, it looks like the goldilocks scenario I alluded to yesterday. Weaker jobs, stronger durable goods. The only scare now is a Yen bid.

NQ holds the March trendline (1907) as we await the durable goods and jobless claims data. Watch those wekly pivots accross the board. YM 13511, NQ 1901.75.

May 24 (Bloomberg) -- Air France-KLM Group, Europe's biggest airline, said fourth-quarter earnings rose sixfold on an increase in passenger traffic and cost savings from combining the carriers. The company forecast higher profit this year.

The Europeans are spending those travel euros and could add support to an oil bid ahead of the US holiday and that consumer's thirst. QM/CL has initial reistance at 65.95, 50% of the recent correction. Resistance is 66.225 and 66.80. Support is 65.45 and 65.05. We have been stuck in a range the past five days as traders hesitate this close to 70. Traders should be nimble and book profits as they come. Hurricane season starts June 1st.

Durable goods, jobless claims and existing home sales on deck tomorrow. Fasten your seatbelts, there is no telling where this is going but by 10:01 we should be on a set course. Traders want goldilocks, of course. A strong durable goods order and a weaker jobs market could do the trick. Nothing too weak, nothing too strong.

SPX 1517 is next support below 1522.

I guess those fib projections I posted this morning (ES 1535 and ER 848) were indeed a short term top (or longer). We'll see, but bears should not get too excited. I doubt we repeat last year's Memorial day sell-off, in fact I would not be surprised to see a bounce tomorrow or Friday.
NQ support is 1906 followed by 1901.50/1903 area. It's pretty strong support and a buy if it holds ( I mentioned that zone on my wrap yesterday).
Keep an eye on China overnight. They might not panic, or they might, who knows. I hope they will ignore Greenspan's comments. After all, he burned them once before in February. He's right about China, of course, but he could still be early.
Check out the put to call ratios the past few days, they have been consistently pessimistic, as if everyone is playing last year's calendar.

NEW YORK (MarketWatch) -- U.S. stocks reversed morning gains and fell on Wednesday, after former U.S. Federal Reserve Chairman Alan Greenspan said on Wednesday that he feared a "dramatic contraction" in the Chinese stock market.


Greenspan just did a number on stocks (he now works for the biggest bond company in the world...is there a conflict there? Pimco was long bonds for some time and got slammed). Watch YM 13559, 5 DMA and NQ 1911 area.

If you feel like panicking, short FXI (China) on a break below 113.80.

Noon update:
ER traders should note that 848 is 23.6% proj. April and natural resistance. For ES, 1535.25 is 38.2% projection April and a stall as well.

GOOG is ripping today, with breakout potential above 485. Support is at 474. That stock, along with AAPL and BRCM, is providing most of the juice in NDX today. It's a very mixed picture, so be careful with NQ longs today.

Comp 2600. NQ closes the morning gap and never looks back. Resistance is 1928.75, 1932.75 and 1938. Support is 1925.75 and 1922.25. SMH is still weak, with support found at 30 dma, 36.80. But a red flag if we don't get back above 37.15 soon.
Oil catches a bid after the inventory data. Watch that one as well as the slight Yen bid.
They are going to try and get some headlines with a COMP close above 2600 (and DOW 13600). That would set up the 2640 target. It will be interesting to see how the day ends. Keep in mind that we have the real meat on Thursday and Friday with key economic reports, so we could see some chop.

Pre-open:
Lenovo brings in some good news for PC's and NQ shrugs off the ADI chip news overnight. QQQQ 47 is firming as support. Watch NQ 1920/1922.25. Monthly R1 is at 1932.75. The pre-open heat map is still showing some chip weakness, although INTC is up once again.
A bidding war is shaping up for Alcan, and equities are loving it so far. YM is strong, reversing yesterday's weakness. That May 13700 target still looms above. After eight straight days of bidding, TNX (ten year yield) might be due for a pause, although we could still see 2007 highs at 4.9%.
Oil inventories at 10. RB (gasoline) is still dropping adding support to NQ.
The yen is back up above earlier support after dropping to new yearly lows last night. It's still way down there and no threat to the carry trade any time soon.
Don't forget to watch RUT 835 support level during the regular session. and those chips, of course.

Bull/bear ratio is finally starting to move into froth territory. The bull read still has room to grow, but with a bear read below 20% last week, start incorporating some defense in your strategy. We'll check this week's reading when it comes out and see if last week's selling increased bears once again.
Right now, it's tough for bears to make any headway with the Yen this low.