Fed Signals A Very Weak Economy--Earnings Poor..Market Yawns...

Stock-Markets / Stock Markets 2010 Jun 24, 2010 - 02:32 AM GMT

The market waited anxiously to hear what Fed Bernanke would say today about the state of the economy. He told us all that the economy, in a word, stinks. He said a lot of negative things mixed in with a dash of this and that, but the thing that was most negative was his telling us that interest rates will stay near 0 for the foreseeable future. This is his way of telling us things are so bad out there that interest rates can't come off 0. Think about that folks. 0!!!

Foreseeable future!!! Wow! So now everyone knows the economy stinks. The market today, so what! We don't need no stinkin' economy. The market is split off from reality, now it seems, more than ever but that's why you can't play the market for it "seems" to be saying. Have to follow those technical's to tell you what's going on and how to approach the most difficult, manipulated game in the world. If you play by your emotions only, i.e., the truth, you are likely to get killed financially.

The truth doesn't work in this game. Never has and maybe never will. As long as you come to play each day based on this reality, you have a good chance to have some success. Based on this news and the other news of the day, housing, the market got a full dose of horrible news. The reward for the bulls was a small gap up. The rest of the day was spent trading back and forth with the Nasdaq lagging some. The market closed flat, once again ignoring terrible news as only the market can. The bulls got hit by two trucks today and just like a good cartoon character, was back to full strength in the blink of an eye. Not bad for the bulls indeed.

So now let's shift from terrible economic news and move to earnings. The market should love this. Earnings are confirming the bad economic news we keep hearing every day. So far, in the past two weeks, we have had earnings from Best Buy Co. Inc. (BBY), FedEx Corporation (FDX) and Carnival Corporation (CCL). In that bunch we have earnings today/tonight from Bed Bath & Beyond, Inc. (BBBY), Adobe Systems Inc. (ADBE) and Nike Inc. (NKE). All six of these company's are economic barometers of the health of things over the past three months. Let's look at the scoreboard.

First there was Best Buy and Fedex. Both said things were not very good although they tried to play spin doctor. Didn't work. Both stocks knocked down hard. 0-2. Then a few days we heard from CLL and they said business for vacationers really slowed, especially in the last month. Its reward was to get hit down the same way Fedex and Best Buy did. make it 0-3. Tonight/today we got earnings from Nike, and Bed Bath and Beyond and Adobe. Three more bad reports for sure. Make it 0-6. All down on their reports. Bed Bath and Beyond and Adobe crushed. The markets response? Flat after hours on the futures. Yawn!! Who needs stinkin' earnings!! If the earnings come in like this going forward, you wonder how the market can stand up much longer. However, never under estimate this market. Like I said, who needs earnings or a good economy to get us higher?!!

So now we see we're going to have a problem with earnings. It appears May saw the economy in the United States fall hard. We recently had the Philadelphia Fed tell us things worsened at a very rapid rate. No growth at all. In fact, things falling apart. Worst report in many years. We see housing report after housing report in the last six weeks come in showing a dead real estate market. We know the last jobs report showed no private sector growth. I need not add more. You get the picture. When the CEO's reported their earnings last quarter, it seems they thought the stimulus affect would somehow continue. It hasn't. They seem to have been caught off guard as evidenced by the reports from the big six listed above. Bottom line is things are worsening for our economy. Will the market ever care? I don't know but it is ominous out there for sure.

We know resistance now comes in at 1131. We have just lost all the exponential moving averages that matter most which are the 20's, 50's and 200's. Also lost price at 1105. So know 1105 is resistance, and then 1131. We know that 1040 is key support. 1044 is January. 1040 in May and 1042 in June. If we break 1040 with force it would constitute a quadruple bottom breakdown and that's not good for the bulls. We're a long way away from that becoming a reality but it needs to be monitored carefully. Like I said, bad earnings and a Fed telling us things are very bad out there hasn't meant much to bringing this market down. Upside will be tough as well. Bigger picture we're in a range of 1040 to 1131. 9% and that's difficult to say the least. Let's see if there's enough bad news in the market the past day plus to get us rocking higher or will the market follow some truth. Unclear for sure. Respect both pivots. Cash is best for the moment. Just the way it is.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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