“It was never my thinking that made me the big money. It was always my sitting tight. ” — Jesse Livermore

The major indices undercut its recent lows and bounced up for the week. Below are the major events which occurred this past week.

1. VIX — hits the high of 48 around the week of May 20th, 2010.
2. Bull/Bear from AAII Survey — Bullish 34.5%; Bearish 43.1%; Long-term averages:
Bullish: 39%
Neutral: 31%
Bearish: 30%
3. BP — oil spill now worse than expected; The company mulls dividends cut as Congress and President Obama continued to put pressure on BP.
4. Retail Sales — felled 1.2% for the month of May. However, ex-gas & auto, it was up by 0.1%.
5. Euro Zones — Greece, Portugal, Spain announced austerity measures to reduce debts.
6. Euro Currency — hits support around 1.197.

The week ahead:
1. Tues 6/15 — BBY 2qtr
2. Wed 6/16 — Housing Starts (May 2010); PPI; Capacity Utilization;
FDX 2qtr;
3. Thurs 6/17 — CPI; Leading Indicators;
SJM; KR 2qtr
4. Option Expiration — Quad. Expiration

We believe the market is oversold and expecting a bounce for the next couple of weeks; We are watching the DOW and S&P500 for immediate resistance at the 200-SMA;

Below are a number of charts to consider:

USD — Weekly Chart

S&P500 — 200-sma resistance at 1,109

Dow Jones — 200-sma resistance at 10,317

We are back after 2 weeks of R&R.

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria” — Sir John Templeton

The major indices continued to sell-off after a 2-day bounce. Below are the major events which occurred this week.
1. Jobs, Jobs, Jobs — reported numbers came in at 431,000 jobs; However 90% were census workers.
2. Hungary — in “grave situation”; Spokesman Peter Szijjarto for PM Viktor Orban said “default is not out of the question. Hungary ‘s problem came out of no-where to compound to the PIIGS problem.
3. Euro Currency — dropped to a low of 1.19 – a 4-year low. Major support for the the Euro is around 1.15 or 1.16 area.
4. Oil Spill Continues — BP tried to cap the well; However, oil is now spreading to Northern FL;
5. M3 Growth Collapsed — M3 measures bank lendings. As noted in the chart below, the M3 dropped since 11/09 as banks raise capital asset ratios and reduce their lendings.
6. S&P lowered Spain’s Credit Rating to AA+ from AAA (May 28) — Spain is the EU’s 4th largest economy.

The week ahead:
1. Treasury Dept $36 Bil 3-year note auction — Tues 6/9
2. Fed ‘s Beige Book & Bernanke & Lacker speak — Wed 6/10;
Treasury Dept $21 Bil 10-year note auction — Wed 6/10;
3. Trade Deficit (April) — Thurs 6/11
Treasury Dept $13 Bil 30-year bond auction
4. May Retail Sales & Prelim Consumer Confidence — Fri 6/11

We remain cautious since Apr 23, 2010 posting; Going forward, we believe the next shoe to drop will be the pension funding and retiree healthcare problems to surface as a result of lower tax revenues from home sales, sales taxes and lower income taxes.

M3 — Money Supply

NASDAQ — support at 200-SMA

DOW JONES — broke support at 200-SMA

S&P500 — broke support at 200-SMA

The major indices continued to sell-off after a quick bounce back, based on news of EU TARP-like bailouts. At this juncture, we continue to remain cautious, as we believe the selling is not yet over. Below are the major events which occurred this week.
1. UK – David Cameron won the election and the Conservative replaced the Labour Party.
2. The Chinese market now officially in Bear Market territory (correction of more than 20%); Recent figures point to inflation and manufacturing slowdown;
3. EU/IMF announced a US TARP-like bailout to the tune of $1 trillion dollars; The ECB/IMF will buy EU countries’s government Bonds if needed; It was reported that the French President Sarkozy threatened to pull-out of the EU if the Germans did not support Greece bailout.
4. Portugal & Spain announced their own austerity measures to prevent a Greece-like catastrophy.
5. Gold hits new high at $1,248 an ounce.
6. NY Attorney General to investigate the major investment banks for misleading CDO’s practices.
7. US Government also announced its own investigation into Morgan Stanley over Mortgage Derivative Products; Goldman Sachs is already under  government scrutiny.
8. The Senate Finance Committee to investigate Home healthcare company practices of overbilling Medicare — related companies effected were (AFAM, GTIV, AMED, LHGC…)

Here are the major events for the next week:
1. 5/18 — PPI (Producer Price Index)
2. 5/19 — CPI (Consumer Price Index)
3. — Greece $8Bil Redemption

Attached is an interesting chart from the European Commission about the PIIGS countries’s public debts.

The major indexes (US & Abroad) sold-off this week based on fear of Greece “Contagion” spinning out of control.
We believe the sell-offs have not finished and are “watching” the market for a possible entry point.
Other negative events that occurred this week:
1. China raised rates to clamp down on real estate prices and manufacturing slowed.
2. Greek parliament voted through the auterity measure; Riots broke out that resulted in the death of 3 bankers. The Greek market continued selling pick up momentum as the ECB refused to buy Greek Bonds;
3. Gulf of Mexico oil spill worsened — Congress talked about raising the cap on damages.
4. EU at risk from the Greece “Contagion” — costs to insure Portugal & Spain spiked higher this week as the EUR hits 1-year low vs USD. This problem seems to resemble the Lehman problem that led to its insolvency in the fall of 2008;
5. VIX spiked upward — spiked to 42 from the low of 15.5 (as noted on April 16 Blog)
6. Australia imposed a “profit” tax of 40% to “resource” companies
7. UK election resulted in a Conservative win with a majority of the votes.
8. NASDAQ corrected 10%+ for the week (from the high on Apr 23).

Next Week
1. G-7 conference call announcement about the “Greece Contagion”

Below is the chart of the S&P500; We are expecting a re-test of 1,095 next week.

The market dropped sharply the week of Apr 30, 2010 due to the following:
1. GS is now under criminal investigation; This further compounds their problem (civil fraud charge) by the SEC. GS possible buy around $110 area;
2. Oil spill spreads to the fishing ground and wildlife areas of the Gulf of Mexico; BP, RIG & CAM sold-offs; (Similar to the Exxon Valdez oil spill in Alaska – 1989); See WSJ comparison
3. Greece awaiting bailout package by May 3rd, 2010; The amount exceeds $100 billion; Next, Portugal’s debt is coming due and Spain’s unemployment exceeds 20%; An indepth and detailed report from Weldon Research regarding Greece, Portugal & Spain.
4. Unemployment assistance phases out at the 99-week limit ;
5. Home Buyer Tax Credit expires Apr 30, 2010
6. Investor Bullishness hits high

For the following ahead,
1. Berkshire annual meeting on Weekend of May 1 & 2.
2. Mon, May 3 — Greece bailout expected by the EU/IMF
3. Tues, May 4 — factory orders

The 2 qtr earning will start on 4/12/2010 with AA & CF reporting after the bell.

It is interesting to note that the major indexes is approaching major resistance (weekly chart); Namely the SPX & DJIA.

Two scenarios are likely to happen; 1. The market will sell-off for a quick 5%-10% correction or 2. Explode past the major resistance; It is unlikely that scenario 2. will happen as expections for a strong 2 qtr is already discounted.

Below are 3 major charts in weekly timeframe.
DJIA — Weekly Chart

Nasdaq — Weekly Chart

S&P500 — Weekly Chart