Out at 1299.5

I do not like the persistent strength after the lunch and I did not have the best entry.

Short at 1303.5 ES

Looking for a big trend day down.

Weekly Wrap Up, July 11 - July 15 2011

Economy: Retail Sales report suggesting future consumer strength

The pace of change of real retail sales has started to slightly accelerate from between the green horizontal lines, a turn that usually suggests the series will rise in the near future.

S&P500: The market looks prone to play the range-bound theme

As the weekly SPX chart above shows, the initial powerful thrust upwards (green ellipse) has not had follow through (red ellipse). Since breadth has been weak lately and since it stayed weak, as the TRIN 13 day ema suggests, the market will most probably retrace towards the bottom of the range shown above.

Looking Forward

Next week will be marked by an ongoing earnings season, ongoing negotiations over the debt ceiling, by housing data and by a big EU summit on Greece. I think the market will anticipate/react to most of these events by falling. Only the EU summit may induce some upside for the market as it will probably try to anticipate a positive outcome.

Trading

I will be looking for short-term short entries on Monday or Tuesday. Although there were some good pull backs last week, I deferred shorting as I expected the incoming economic data and Ben Bernanke's testimony to represent reasons for a multiday pull-back.

As the market fell this last week, it seems that smaller pull-backs were 10 points long and a larger pull-back was 20 points long. At Friday's close, the market had already retraced 10 points from the intraday low on Thursday.

Range-Bound

The market action after the bad employment report on Friday is not something that fits in my new bull leg scenario. Also, one indicator I watch for breadth, the 13 day EMA of TRIN, dropped unusually fast on Monday's sell off (the scale is inverted), a behavior uncommon to bull legs.

Adding yesterday's very weak close made me change my short term outlook. I am expecting a drop in the next weeks to the SPX 1260-80 zone, before any significant upside. This way the market may continue to play the range-bound theme and look similar to the range in 1991, after the big 30% + rally that started in 1990.

This market weakness fits the anticipation of a weak Q2 GDP report at the end of the month, as well as probably a not too good earnings season.

Stopped Out at 1331

I had left a stop loss overnight.

I will look to reenter starting tomorrow. I hope this pull-back does not get too big to allow everyone to try the long side.

Weekly Wrap Up, July 5 - July 8 2011

Economy: Bad employment number

Despite the bad NFP number for June, the average pace of change in private payrolls is showing just some normal volatility as it did in previous expansion cycles.

S&P500: The market is ready to power higher

Previous up legs closed higher almost every week after the inital rally off the lows.

Shorter term, the 1341 SPX support on the daily chart was not broken while the market registered a normal 20 points correction:

One Week, One Stock: Intercontinental Exchange (ICE) - looking good

Yearly sales growth is expected to register a mild slowdown in FY 2012, which does not look ominous and should not bring earnings surprises.

Using the historical P/E range and an estimate for the EPS at the end of FY12, I got an average price target of 166.

I discounted the Zacks.com EPS estimate by 10% in order to be conservative. At 128, Friday's close, the stock looks undervalued. Also favoring the upside is the recent trend of estimated EPS revisions:

source: Zacks.com

Looking Forward

Next week we get a Ben Bernanke testimony, a retail sales report and a CPI report among other data. I think the market will anticipate these events by moving up.

In light of the recent employment report, I think the market will rise into BB's speech. Also, there are strong expectations from the retail sales report and I expect the CPI to come in showing a further slowdown in its average pace of change.

Ideas

(continued from last week's wrap up, ideas section)

The intraday movements of the put/call ratio would have suggested long entries starting at 2:00 PM, eastern time. Not bad!

Trading

I am long from 1330.5 ES (entry posted here).

I will be looking for opportunities to further add to this position as the market confirms Friday's after-the-lunch strength.

Update

The sell off following the NFP number is an opportunity to buy. Around 1330 ES the correction from yesterday's high is about 20 points big, double the previous one. The real bearish development would be a move to 1325 ES, which would make me close my long position.