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Quiet day for the broad markets on Thursday as investors look to the jobs report today. The consensus is improving jobs are the most important data point for investors moving forward. While I am not sure that is true we will accept the proxy as an key data point. The expectations for the number are 121,000 new jobs for January. Thus, the indications are for risk acceptance to rise in portfolios as investor confidence returns. Depending on the how the number plays out today it could provide the catalyst investors have been looking for.

With that in mind, I am still looking at the earnings data and it shows a different picture for corporate America. The data has been mixed at best. There has been the Apple upside surprises that have sparked big gains for stocks. But, equally there have been the disappointments from the Google’s and Amazon’s that have beaten stocks down. Which is the better indicator looking forward towards the balance of 2012?

The retail sector is getting hit by a mild and warm winter. Department stores are have missed sales projections on weak apparel sales. The discounters are seeing solid sales, but the major department stores aren’t looking quite as confident. The same store sales data showed around a 2% increase across the board versus 4.8% in January 2011.  There was a anticipation of growth with the giftcard overlap from Christmas, but it didn’t seem to materialize. Sales were not great, but then they weren’t awful, thus the trend of late with data. There were was bright spots however,  Green Mountain Coffee Roasters (GMRC) jumped 23.9% on Thursday as earning far exceeding expectations. XRT closed flat on the day with overall mixed data. The upside for the sector is being questioned short term.

The markets closed flat on the day with the NASDAQ the winner up 0.4%. The resistance is in play still and today will bring some interesting opportunities to move higher if the data from the jobs report is good. S&P still has 30+ points to clear the March highs and Small Cap is 7 points from the highs. A break above the previous highs is where all eyes are focused. However, getting through the highs are one thing, staying and progressing further is another.

The economic data continued its trend on Thursday of being so-so! Jobless claims were lower at 367,000. Productivity was up 0.7%, but well off the 1.9% rise in December. Unit labor costs were up 1.2% which was not pretty. Today is all about jobs and the ISM services data is out in addition to factory orders, just to add to the fun. It will be a big day on the data front.

On Thursday notes, I stated five concerns relative to the economic outlook, one of which was the Baltic Dry Shipping index. The numbers have fallen to record lows and Thursday marked the 32 consecutive day on the downside. The concern relative to the global growth outlook has come under question. The index hit a low at 662 and the talk of a global recession is picking up as a result. If you look at the shipping ETF from Guggenheim the move off the low in December is starting to accelerate and break above the October highs. There is some discrepancy in the two indexes and this is definitely something to watch near term.

Investor risk tolerance is rising with the market indexes. The dividend stocks were the benefactors of concerns relative the slowing growth. That trend looks to be changing. The dividend stocks of the S&P 500 index are down 1.3% year-to-date. The stocks have struggled in relationship to earnings reports. Many have been sluggish and others just completely missed the mark. The pull towards the beaten down companies or more attractive growth stocks is pushing money towards higher risk positions to garner the returns short term. Chasing returns is a dangerous game, but it one investors tend to like and practice regularly. Watching DVY as benchmark proxy near term.

We end the week on plenty of data reports and the challenge of the 2011 highs. Watch, digest and react accordingly. Set you stops, and let the good time roll.

Sectors on the Move:
Essentially a flat day for the broad market indexes, but there were some sectors moving higher on the day.

NASDAQ index was up 0.4% on the day and again led the broad market indexes. The ability of the index to continue leading the broad markets is the only reason most are still positive overall towards the equity markets. As long as the leadership remains there is hope of breaking above the 2011 highs. You still have to keep your stops in place and remain focused on the risk/reward of ownership near term.

Treasury bond yields fell as money shifted to “safety”. The 30 year bond dropped to 2.93%, but has managed a move back to the upside at 3.01% to curb the rally in bonds. The move benefited the bonds, but now you have to watch the downside of TLT if this move continues. If there truly is confidence in stocks, bonds should erode as rates rise. Yet another indicator to watch relative to a topping market short term..

Technology stocks moved above the resistance at 705 and closed at 722 and above the high of 2011. The short term uptrend off the December lows is still in play. The gains are a result of the parts continuing to drive the whole. Software broke above near term resistance and looks ready to move higher. Semiconductors were the primary driver but have stalled at resistance. SWKS and TXN both made moves above key resistance points to help the sector. Networking, internet and computer hardware have  stalled near term. Still looking at the upside to remain in play and lead the markets overall. stops are a must on positions.

Commodities (DBC) made a move off the December lows, but have faced resistance in an attempt to move above the top end of the range. Oil is the challenge as it moves up and down relative to the global picture for demand. Watch for a clear break higher before putting money to work. The sub-sectors were moving better than the whole, but they have started to stall as well. Set your stops and manage the risk going forward.

Financials (DJUSFN) – The banks bounce back from the Goldman downgrade on Monday. Banks look better as well as the regional variety. Insurance stocks have been the leader of late to assist on the bounce back. Brokers are gaining as well. Overall the outlook remains optimistic, but the earnings and asset risk remain  the primary concern near term.

Basic material (DJUSBM) made a solid move higher above the 200 day moving average and has started to follow through after getting over the short term stall. This is a sector we are adding to the watch list to add to positions.

Gold continues to find buyers as the price settles at $1747. The downtrend line off the August high was broken on the move higher. Watch as the metal faces plenty of technical obstacles in conjunction with the spike higher. Europe/Greece could influence the move higher near term. Expect the Fed stimulus to wear off and watch for a test of the move.

The global markets have made a move off the lows and the short term positive feeling towards Europe’s efforts to deal with the debt crisis is driving the trend. How this plays out will take time and more time than most investors are willing to wait. Thus the traders are alive and well. The move in the various country indexes have been solid over the last three weeks. Trading is okay, investing longer term is a challenge as the crisis is not over and the potential downside risk remains. Watching for a defined direction short term and the opportunities that will accompany the move.

Energy stocks have continued to struggle with resistance. Scanning the sector has shown some signs of life with natural gas stocks. CHK bounced off the lows and is setting up a double bottom pattern and APC is at the top side of a trading range looking to breakout. There is some movement, but the sector overall continues to struggle.

The markets are overbought short term technically, but we have to let it run its course. The key is a catalyst to change the direction. Europe is brewing as a potential catalyst short term as positive talk following the EU meeting on Monday has helped the outlook. The trend the last several months has been slowing economic data, but it hasn’t been bad. It is important to manage your positions and risk accordingly. The outlook remains questionable, but the buyers continue to step in at each sign of weakness. Stay disciplined and focused on your objective.

What I am watching today:
Data, data and more data. The key is the reaction from investors. It is not just the open today, but how stocks act as they approach their respective highs. Do they fade, break through with confidence or wait until next week? What if the data disappoints? How do investors react? Volume is another issue plaguing the move higher. It will not all be resolved today, but there will be plenty of clues given.

The base principles… Gold, the dollar, interest rates and oil. Each are at decision points. Gold moving higher through the next level of support. The dollar finding support from the recent weakness. Interest rates bouncing off the recent lows, and oil broke near term support on Thursday?

New month, new money is pushing February higher to start, how long does this last?

Some additional leadership to technology. There is a lack of punch from the other sectors as they drift along near their respective highs. Telecom is back at the high end of the trading range. QCOM announced some positive data moved higher to breakout on Thursday. IYZ is the ETF to watch on the upside for the sector overall.

Watch and play according to your risk tolerance. Everyone has different trading styles and you have to find what works for you and your personality. Don’t put yourself in positions you don’t understand or take risk you can’t tolerate. Not every trade results in a profit, but controlling your downside risk determines your long term results. Trade smart.

Maybe I should have talked bad about the market sooner. The move on Wednesday pushed the indexes higher, but it still showed some doubt the last hour. The small cap stocks were the clear winner adding more than 2% on the day. Basic materials were up 1.35% and financials gained 1.6%. This pushed the S&P 500 index above the 1320 mark, the NASDAQ to July highs near 2860 and Dow to July highs of 12,755. There is still the matter of breaking above these resistance points going forward. If we are going to break higher there will need to be a sustainable catalyst for the broad markets. There is lies the current challenge for the bulls… commitment?

The economic data helped on Wednesday as the ADP job report showed 170,000 private sector jobs added. That is well below the pace in December, but positive nonetheless. ISM manufacturing was at 54.1% up from December, but light of the expected 54.5%. Construction spending was up 1.5% well ahead of expectations and auto sales were ahead of expectations at 14.2 million. The data is still positive, but not great. Thursday and Friday are filled with more insights to the economy and could lend a helping hand to the bulls. This data alone is not going to provide the catalyst unless there is something big coming that isn’t in the current forecast.

Facebook’s IPO is ready to hit Wall Street for $5 billion. There is no price or date currently, but it is grabbing plenty of headlines. Why bring this up as a market catalyst? An offering with this much buzz could impact the sentiment towards stocks near term. If nothing else is will create some buzz around the water cooler.

The three primary sectors we need to lift the markets are Technology, Financials and Healthcare. They account for more than 40% of the total weighting of the S&P 500 index. Tech has done it’s part for the move higher and recently broke above the 706 resistance point leading the sector to a new high. Financials have been pushing higher as well, but stalled on all the European debt exposure rumors. The move back above 265 on Wednesday helped maintain the uptrend in play, but it needs to regain the upward momentum. Healthcare is at the July highs and looking to push through this resistance. Thus, all three are in a good spot to help the catalyst to the upside, and lead. They are the focus short- term for the catalyst.

The global markets are throwing their support behind the move to the upside as Europe (IEV) moved above the $36.10 resistance. The EAFE index is pushing higher as well gaining 1.6% on Wednesday. Emerging markets were up 2.1% also to aide the outlook for the world markets overall.

The parts are in place to continue the move higher, but there are still issues and worries facing the upside of this market. Here are some concerns that keep me on edge relative to the advancement of the current trend.

• Shipping data remains weak. The Baltic Dry Index has declined considerably showing weakness relative to the prices of shipping goods. The last month has shown a big drop worthy of attention. This may be a seasonal issue, but it may be an indicator relative to the global economic conditions.
• The level of debt issued by the US Treasury Department relative GDP. No one in Washington seems to notice or care?
• Short interest is very low. In fact, it at levels similar to April of 2011 when the market hit a high and reversed.
• Volume heavily favors upside leveraged ETFs than the downside leveraged ETFs. Negative indicator short term.
• Short interest in QQQ at a 10 year low? Overbought indicator towards large cap technology stocks.

None of these are indicators that Rome is burning, but they do show a bias on the upside that is overdone short- term. Warning signs are just that. Manage the risk and adjust your stops accordingly.

Sectors on the Move:
Small Cap, Mid Cap, Financials, Basic Materials, Technology, Banks and Healthcare Providers led the sectors on the day.

NASDAQ 100 index remains the primary leadership for the broad market. The earnings news for the sector has been the catalyst to the upside. However, Amazon put a dent in that prize. They fell 8% on Wednesday following earnings holding the index down on the day versus it’s peers. Continue to manage stops in accordance with your time frame for the holding.

Treasury bond yields fell as money shifted once again to “safety”. The 30 year bond dropped to 2.93% over last five trading days. After a positive equity day the yield moved back to 3.01% to stop the rally in bonds. The move benefited the bonds, but now you have to watch the downside of TLT if this move continues. If there is confidence in stocks the bonds will continue to erode as rates rise. We look for them to remain within the current range.

Technology stocks moved above the resistance at the 705 level is still in play with the close at 712. The short term uptrend off the December lows is still in play. Watching the parts currently for insight as to how it will play out. The stall gave way to more buying today and moved to 721. The . Decision point as the large cap technology stocks have been the leadership for the sector. Stops are a must on positions. The software stocks were the leader on the move higher.

Commodities (DBC) made a move off the December lows, but have faced resistance in an attempt to move above the top end of the range. Oil is the challenge as it moves up and down relative to the global picture for demand. Watch for a clear break higher before putting money to work. The sub-sectors were moving better than the whole, but they have started to stall as well. Watching this is a warning short term. Set your stops and manage the risk going forward. Precious and base metals are two parts leading the way higher. Oil, coal, agriculture, etc. have stalled near term. Focused approach is the best approach to the sector.

Financials (DJUSFN) – The banks bounce back from the Goldman downgrade on Monday. Banks gained better than 1.4% and held on to the gains. A rolling top pattern gave way to the push higher on Wednesday and we now watch for the next move. The Fed announcement to keep zero percent interest rates through 2014 was the catalyst to the pullback and the downgrades added to the pressure. You have to protect against the sentiment as well as the reality short term.

Basic material (DJUSBM) made a solid move higher above the 200 day moving average and has started to follow through after getting over the Fed statements. On our watch list to add to positions, but willing to watch and see how it progresses near term.

Gold continues to find buyers as the price settles at $1747. The downtrend line off the August high was broken on the move higher. Watch as the metal faces plenty of technical obstacles in conjunction with the spike higher. Europe/Greece could influence the move higher near term. Expect the Fed stimulus to wear off and watch for a test of the move.

The global markets have made a move that mirrors the US markets, but they are gaining some momentum short term. They are waiting for the catalyst or the all clear signal concerning sovereign debt in Europe, but that may not happen for awhile. For now it remains a trade. Scanning the country ETFs has provided some good opportunities short term. The emerging markets have been solid on the upside, but we are facing some key resistance from the October high. Asia has been improving, but China (FXI) fell 2.8% on Monday, but bounced back on Tuesday and Wednesday. Watching for a defined direction short term.

The markets are overbought short term technically, but we have to let it run its course. The key is a catalyst to change the direction. Europe is brewing as a potential catalyst short term as positive talk following the EU meeting on Monday has helped the outlook. The trend the last week has been slower economic data, but it hasn’t been bad. It is important to manage your positions and risk accordingly. The outlook remains questionable, but the buyers continue to step in at each signs of weakness. Stay disciplined and focused on your objective.

What I am watching today:
Follow through on the positive move Wednesday. The markets has still not achieved a ‘breakout’ and we need some volume on the move if it develops. A vote of confidence would be a positive.

Economic data continues today and tomorrow. The concerns are rising as data is on the weaker side of late.

New month, new money? Or is February setting up to outperform January?

Bond yields rose finally showing more optimism towards the move higher. Watch yields, bond prices and money flow in the sector.

Oil moved lower on inventory data. Will it test the $93 mark again or maintain the current levels near the $100 mark?

Watch and play according to your risk tolerance. Everyone has different trading styles and you have to find what works for you and your personality. Don’t put yourself in positions you don’t understand or take risk you can’t tolerate. Not every trade results in a profit, but controlling your downside risk determines your long term results. Trade smart.

The market is turning back to the up and down syndrome, with the end result of moving sideways the last week. The headlines are full of how great January was relative to the broad market indexes. The news makes great headlines, but what is the market doing now? The more relevant question for investors is how do you keep January’s gains? There in lies our goal for today’s notes, keeping gains and looking forward.

The first news that caught my eye was Amazon. They missed sales targets for the quarter. Shares are down 9% overnight and plenty of question marks hanging over the stock, but just as important is the retail side of the equation. There forward guidance on sales were lower than expected as well. Is this an indication of the retail sector overall? The sector will start to report earnings in the coming weeks and this puts a cloud over the expectations. XRT, SPDR Retail ETF is on our watch list to watch relative to the sector overall.

Another news item worthy of investigation is earnings from Exxon Mobil. The refinery business has cost them the last two quarters. This is not really a surprise from my view considering all the data points we have seen over the last six months. The margins relative to higher oil prices and slow to rise gasoline. That may change looking forward as gas moves towards the $4 mark. They reported a 63% drop in earnings from refiners. Is this an ongoing problem or a short term event? That is the question we have to ask relative to the sector and the conglomerates. Thus, the energy sector is on our watch list near term for some direction. The sector has stalled since October and it will need some type of catalyst to break above the current resistance. The Dow Jones US Energy Index needs to move above the 620 level to show some upward momentum.

What about the economic climate? The data has been gradually improving month-after-month, but we are seeing some signs of slowing. Personal income and spending was disappointing in January. The ISM data was flat for December and the new data will be out on Wednesday with growth in the estimates. Homes were looking positive, but the resent data shows there is still some trouble on the horizon. The greatest concern is foreclosures hitting the market in masses. Home prices dropped 1.3% in November (old data), but watched nonetheless. Consumer confidence has been on the rise, but surprisingly dropped in January. GDP was up 2.8% in the fourth quarter, but some expected more. The challenge for investors is determining if smaller growth is better than no growth, and can stock prices be supported by slower growth to move higher? The economic outlook is cloudy at best, but optimism is held by many looking forward.

Europe is forever in front of us relative to the resolution of the sovereign debt crisis. They made headway in Brussels on Monday at the meeting with the EU leaders. They vowed to control spending and to backstop the debt with a permanent bailout fund. This is one part of our watch list that hasn’t changed. We sold our positions relative to Europe and booked solid gains short term. Watching for a pullback or test of the move off the December lows. This could present future opportunities looking forward. Be patient and let this story continue to unfold.

Asia is another area of concern for the global markets. China has slowed, but like the US data has shown some areas of optimism, but there is still the lingering doubt the bubble in China still wants to pop. The recent rise in commodity prices has helped fuel some movement in the stocks on the upside. But, if commodities falter and move lower again watch for China to move lower as well. We stopped out of our positions in China with a small gain on Monday and we are looking to see how it develops short term. We are leaning more towards the downside play than a resumption of the upside near term.

The broad market indexes are hitting against resistance and there is plenty of talk relative to the broad markets being overbought. All of the comments are essentially speculation. As long as investors feel there is growth on the horizon the optimism will drive stock prices higher. That said, we have stalled on the advance towards the July high on the S&P 500 index. The best course of action is to be patient, set your stops according to the risk you are willing to accept short term. The long term view is even harder to predict relative to the data we are watching and reading. Thus, longer term holdings are at equal if not greater risk than short term holdings. The key is manage the risk in accordance with your own psychology.

Overall the market is getting mixed grades from analyst. Some like the steady progress, while others believe we are heading lower and the economy will slow again relative to the drag in Europe and Asia. Those type of comments alone are why we are able to have a functioning market… for every seller there has to be a buyer. The transaction of stocks alone requires there be two different opinions about the direction of every stock and the market. Follow the trend it is the ultimate decision maker.

Sectors on the Move:
Little changed in the way of our analysis on sectors based on Tuesday’s market action.

NASDAQ 100 index remains the leader for the broad market. The earnings news for the sector has been the catalyst to the upside. However, technically the signs are pointing towards being overbought short term and a test or pullback within the move may be in store. The open pushed lower on Tuesday, but the sector managed to end the day in positive territory for the second day in a row. Manage your stops in accordance with your time frame for the holding.

Treasury bond yields fell as money is shifting once again to “safety”. The 30 year bond dropped to 2.93% from 3.16% over last five trading days. The move is benefiting the bonds as the price of TLT jumped 2.3% the last two days. The movement in the bond shows the lack of faith investors have in stocks near term. Short term target on TLT is $122.

Technology stocks moved above the resistance at the 705 level is still in play with the close at 712. The short term uptrend off the December lows is still in play. Watching the parts currently for insight as to how it will play out. There is a stall at the current level and the sub-sectors are showing some weakness at the highs. Decision point as the large cap technology stocks have been the leadership for the sector. Stops are a must on positions.

Pharmaceuticals are attempting to pull back from the near term high. This move has stalled the healthcare sector, but the medical devices have made a solid move higher. The healthcare providers have stalled but could be a catalyst for the upside. Again the parts will determine the direction of the whole. Adjust your stops accordingly and manage the risk of the sector short term.

Commodities (DBC) made a move off the December lows, but have faced resistance in an attempt to move above the top end of the range. Oil is the challenge as it moves up and down relative to the global picture for demand. Watch for a clear break higher before putting money to work. The sub-sectors were moving better than the whole, but they have started to stall as well. Watching this is a warning short term. Set your stops and manage the risk going forward. Precious and base metals are two parts leading the way higher. Oil, coal, agriculture, etc. have stalled near term. Focused approach is the best approach to the sector. Watch for precious metals to test the move higher.

Financials (DJUSFN) – The banks attempted to bounce back from the Goldman downgrade on Monday. Banks gained better than 1% at the open on Tuesday, but gave it all back to close flat. A rolling top pattern is forming in the sector and we have to be aware of the risk short term. The Fed announcement to keep zero percent interest rates through 2014 was the catalyst to the pullback and the downgrades are adding to the pressure. You have to protect against the sentiment as well as the reality short term. Tighten stops and see how this plays going forward. Expect a pullback within the trend.

Basic material (DJUSBM) made a solid move higher above the 200 day moving average, but stalled on the Fed news. Still on our watch list to add to positions, but willing to watch and see how it progresses near term.

Energy (DJUSEN) failed to gain any momentum from Exxon earnings as they disappointed on the refinery side. Earnings were good, but the worries remain in the conglomerates. A break above the resistance line of sector is the key to progressing higher. For now be patient and let this play out. If oil prices move higher watch for a move towards the target of 653 short term.

Gold continues to find buyers as the price settles at $1737. The downtrend line off the August high was broken on the move higher. Watch as the metal faces plenty of technical obstacles in conjunction with the spike higher. Europe/Greece could influence the move higher near term. Expect the Fed stimulus to wear off and watch for a test of the move.

The global markets have made a move that mirrors the US markets. They are waiting for the catalyst or the all clear signal concerning sovereign debt in Europe, but that may not happen for awhile. For now it remains a trade. Scanning the country ETFs has provides some good opportunities thus far. They are all worth watching and trading, but not much more at this point in time. We took our exit from all positions in the Europe to book the gains. Now we focus on what the fall out will be, if any.  The emerging markets have been solid on the upside, but we are facing some key resistance from the October high. Asia has been improving, but China (FXI) fell 2.8% on Monday, but bounced back 0.86% on Tuesday. The short side will look attractive if the selling continues.

The markets are overbought short term technically, but we have to let it run its course, don’t assume. The key is a catalyst to change the direction. Europe is brewing as a potential catalyst short term, but it has turned out to be better news than expected with the vote to agree on greater spending controls. Earnings are still key with the energy stocks starting to announce this week. Amazon disappointed after the close and will have some influence on the retail sector. The trend the last week has been slower economic data, that continued on Tuesday with housing and consumer confidence lower. It is important to manage your positions and risk accordingly. There is the set up for a pullback short term, but we have to remain diligent in the process of money management not speculation.

What I am watching today:
More of the same up and down activity within a tight range. Today begins a new month and that will bring an influx of money and maybe a positive upside, but I am not a buyer here. These are levels where you manage and avoid risk. Looking for a catalyst one direction or the other. Some volume would be nice as well.

Economic concerns are rising as data is on the weaker side recently. Watch as there is a ton out the balance of the week. ISM manufacturing the big number today.

As goes January, so goes the year? It is a statistic and nothing more. Watch how the data unfolds be you make any assumptions.

1.8% on the ten year Treasury? Fear is driving yields lower as money continues to flow into the bond. Still a concern overall as the bond prices move back to the previous high. This has money searching for alternative yields at higher risk.

Gasoline spiked in price on Friday in response to refining issues. The concern remains heading towards the summer. More shut downs versus a spike in demand could produce a shortage. Prices are up 15% since December. I like adding to positions on a pullback. Supply data out today.

Watch and play according to your risk tolerance. Everyone has different trading styles and you have to find what works for you and your personality. Don’t put yourself in positions you don’t understand or take risk you can’t tolerate. Not every trade results in a profit, but controlling your downside risk determines your long term results. Trade smart.

Watch and be patient on the EGG

Monday, January 30th

TLT gapped higher at the open and we passed on the entry. Watch tomorrow for new scan on the situation. Patience! Good call just needed the entry on Friday.

Sunday, January 29th

The markets are at a precarious point of the short term uptrend. There is some topping in several of the indexes. Overbought signals technically are in play and the economic data last week left investors concerned about the outlook for stronger growth. All said, the risk level of the markets from a short term perspective are high. That makes the EGG selection a challenge. The momentum areas of the scans are show plays where the risk/reward don’t meet our criteria for selection.

Emerging markets as well as the global markets in general are showing solid moves off the lows. However, those moves have been in conjunction with the US markets leaving the risk levels the same or higher.

All said, we came down to two selections, first the one posted to the table, iShares 20+ Year Treasury Bond ETF (TLT). Why bonds? First and foremost, the risk level of the equity markets. Second, money rotation last week from stocks to commodity based positions due to the Fed announcement on zero percent interest rates. The speculation of inflation is back in play to push commodity prices. More importantly fear of slowing economic conditions as the rational for keeping rates low. Throw in some confirmation data from the economic reports and concern starts to rise. Thus, we are looking for a move in TLT back to the top end of the trading range. The details of the play are posted below.

The second options was ProShares Short S&P 500 Index (SH). This is the non-leveraged short ETF of the S&P 500 index. The downside risk is rising relative to the index. It has struggled to take out the current level of resistance as earnings data has been mixed. Throw in some weaker economic reports last week and big list of new reports this week, and you have the making of a short term pullback in the broad index. There wasn’t enough confirmation into the close on Friday to take the pick. We continue to watch how it performs to begin the week and any opportunity it will present.

The broad market indexes dropped more than one percent to start the trading week, but managed to work its way back to positive on the NASDAQ and down just 0.25% on the S&P 500 index. Why? There was the European Union meeting in Brussels which made investors nervous, but as the day unfolded they were willing to temper their fears and use the infamous, “buy on the dip” strategy. Not one of the more successful investment strategies, but one that is always popular when the markets are moving higher.

The meeting in Europe was met with higher yields on sovereign debt in Portugal and Greece. The issues in Europe had shifted to the back burner most of January, but the renewed focus could have an impact on the markets overall. The EAFE index fell 1.2% on the Monday with the S&P Europe 350 Index down 1.5%. Spain fell 2.3%, Italy was off 1.2% and Germany was down 1.6%. Not dramatic, but attention getting for the global picture. Adding to the picture in Europe the US banks are increasing lending standards to European banks. All fuel for the fire relative to the issues facing both the US and European banks on loans. When it is all said and done not much has changed overall.

How do the markets react to Europe and the agreement signed by 25 of the 27 EU nations? Initial blush is positive. The reception to the continued cuts and fiscal spending curbs were applauded. Will it be enough to continue the rally in the US and global markets? The European Stability Mechanism was also endorsed. This is the permanent rescue fund that will aid in the bailouts and keep the financial crisis from spreading, in theory. The 500 billion euro ESM is projected to be in place by July if approved by the finance ministers of the EU. In a word, progress. In all the published media following this meeting, that was the one thing they all seemed to agree on. And with that there could be progress in the financial markets.

If Europe is enough to remove any fear from the markets relative to the financial crisis, do we trade higher? Is this enough of a catalyst to push the broad indexes back to the February/March highs?  Many analyst believe it is a key to the continued progress of the recover and current trend for the markets.

Earnings are back in the spot light with Amazon set to report. Exxon, Pfizer and UPS will post earnings as well and give their insight into how the economy is progressing. They are expected to give a boost to investors confidence. Overall the market is getting mixed grades from analyst. Some like the steady progress, while others believe we are heading lower and the economy will slow again relative to the drag in Europe and Asia. Those type of comments alone are why we are able to have a functioning market… for every seller there has to be a buyer. The transaction of stocks alone requires there be two different opinions about the direction of every stock and the market. Follow the trend it is the ultimate decision maker.

Sectors on the Move:
NASDAQ 100 index remains the leader for the broad market. The earnings news for the sector has been the catalyst to the upside. However, technically the signs are pointing towards being overbought short term and a test or pullback within the move may be in store. The open pushed lower on Monday, but the sector managed to end the day in positive territory. Manage your stops in accordance with your time frame for the holding.

Treasury bond yields fell as money shifted once again to “safety”. The 30 year bond dropped to 2.98% from 3.16%. The move is benefiting the bonds as the price of TLT jumped 1.2% on Monday. That was the EGG position for the week! The movement in the bond shows the lack of faith investors have in stocks near term. Short term target on TLT is $122.

Technology stocks sold early on Monday, but led the charge off the lows of the day. The sector ended the day up 0.3%. The attempts to break above the resistance at the 705 level is still in play with the close at 712 on Monday. The short term uptrend off the December lows is still in play. Watching the parts currently for insight as to how it will play out. There is a rolling top on each of the sub-sectors forming over the last week. Decision point as the large cap technology stocks have been the leadership for the sector. Stops are a must on positions.

Pharmaceuticals are attempting to pull back from the near term high. This move has stalled the healthcare sector, but the medical devices made a solid move higher. The healthcare providers have stalled as well putting additional pressure on the broader sector. Again the parts will determine the direction of the whole. Adjust your stops accordingly and manage the risk of the sector short term.

Commodities (DBC) made a move off the December lows, but have faced resistance in an attempt to move above the top end of the range. Oil is the challenge as it moves up and down relative to the global picture for demand. Watch for a clear break higher before putting money to work. The sub-sectors are moving better than the whole and this is a sector you have to dig down to find the leadership. Precious and base metals are two parts leading the way higher. Oil, coal, agriculture, etc. have stalled near term. Focused approach is the best approach to the sector. Watch for precious metals to test the move higher.

Financials (DJUSFN) – The downgrade by Goldman Sachs for Bank of America was key to the downside for the sector overall. The sector ended the day off 1%, with banks down 0.75%, and Bank of America fell 3% to close at $7.07 per share. A rolling top pattern is forming in the sector and we have to be aware of the risk short term. The Fed announcement to keep zero percent interest rates through 2014 was the catalyst to the pullback and the downgrades are adding to the pressure. You have to protect against the sentiment as well as the reality short term. Tighten stops and see how this plays going forward. Expect a pullback within the trend.

Basic material (DJUSBM) made a solid move higher above the 200 day moving average, but stalled on the Fed news. Still on our watch list to add to positions, but willing to watch and see how it progresses near term.

Energy (DJUSEN) attempted to move higher on optimism, but has stalled along with oil prices. A break above the resistance line of is the key to progressing higher. For now be patient and let this play out. If oil prices move higher watch for a move towards the target of 653 short term.

Gold made a solid move through the resistance at the $1665 mark and thanks to the Fed has moved to $1740. The downtrend line off the August high was broken on the move higher. Watch as the metal faces plenty of technical obstacles in conjunction with the spike higher. Europe/Greece could influence the move higher near term. Expect the Fed stimulus to wear off and watch for a test of the move.

The global markets have made a move that mirrors the US markets. The started the same direction on Monday, but the US markets managed to bounce back near the zero line. Europe on the other hand remained lower on the day. This is all worth watching. We took our exit from all positions in the Europe to book the gains. Now we focus on what the fall out will be if any.  The silence relative to Europe has been broken and the risk needs to be managed accordingly.The emerging markets we not spared as EEM fell 1.4% as well. Asia has been improving, but China (FXI) fell 2.8% on the day. Watch as this all unfolds. The short side will look attractive if this continues.

Plenty of conversation about the markets being overbought short term. As we all know it can remain so for extended periods of time. The key is a catalyst to change the direction. Europe is brewing as a potential catalyst short term. Earnings are still in motions with the energy stocks starting to announce this week. Plenty of economic data as well with the end of the month. It is important to manage your positions and risk accordingly. There is the potential for a pullback short term, but we have to remain diligent in the process of money management not speculation.

What I am watching today:
European influence following the meeting in Brussels. The initial response is positive? Will it follow through in the US? The media being positive doesn’t always translate into the markets following suit. Today’s reactions will tell plenty.

The dollar has been falling, but bounced on the worries in Europe. FXE stalled at resistance. UUP bounced. Direction? UDN is in play relative to a positive outlook short term for the EU.

Bank downgrade from Goldman Sachs hit the sector, watch for bounce back or continuation of the downside.

Treasury yields spiked on concerns relative to Europe. If the concerns are abated by the meeting, do Treasury yields rise back near the 3.1% level? TBF will rise if that is true.

Gasoline spiked in price on Friday in response to refining issues. This is a concern heading towards the summer. More shut downs versus a spike in demand could produce a shortage. Prices are up 15% since December. I like adding to positions on a pullback.

Will there be short opportunities in FXP, SKF or EPV? Or, buy on the dips? Who wins?

Watch and play according to your risk tolerance. Everyone has different trading styles and you have to find what works for you and your personality. Don’t put yourself in positions you don’t understand or take risk you can’t tolerate. Not every trade results in a profit, but controlling your downside risk determines your long term results. Trade smart.

The month of January comes to a close this week. There has been plenty to cheer as the worries subsided and optimism prevailed. The positive stories remain, but the old worries are starting to surface yet again. The European Union has a meeting on Monday in Brussels to discuss further the issues relative to the sovereign debt crisis. There is still the challenge of a plan and funding of the plan. The news surrounding Greece will add to the drama and the solutions. Add to the returning worries the strength of the US economy. The economic reports have shown some contraction in growth as the GDP was below expectations in the fourth quarter at 2.8%. The action taken by the Federal Reserve relative to zero percent interest rates through 2014 signaled additional concerns for economy. These worries and more could shift the optimism that was prevelent in January.

I want to start the week with a review of what moving and what to watch as we move through the end of one month and the beginning of another.

Sectors on the Move:
NASDAQ 100 index remains the leader for the broad market. The earnings news for the sector has been the catalyst to the the upside. However, technically the signs are pointing towards being overbought short term and a test or pullback within the move may be in store. If the worries building evolve they will likely provide a short term catalyst. Manage your stops in accordance with your time frame for the holding.

Technology is hitting against the high going back to January of 2011. The attempts to break above this level and continue the uptrend has been a year long process. Watching the parts currently for insight as to how it will play out shows similar resistance for semiconductors and networking sectors. Software is leading currently, but not enough to break higher. Watch the sub-sectors for clues short term relative to direction. Stops need to be set accordingly.

Pharmaceuticals arre attempting to pull back from the near term high. This move has stalled the healthcare sector, but the medical devices are moving higher. The healthcare providers have stalled as well putting additional pressure on the broader sector. Again the parts will determine the direction of the whole. Adjust your stops accordingly and manage the risk of the move higher.

Commodities (DBC) made a move off the December lows, but have faced resistance in an attempt to move above the top end of the range. Watch for a clear break higher before putting money to work. The sub-sectors are moving better than the whole and this is a sector you have to dig down to find the leadership. Precious and base metals are two parts leading the way higher. Oil, coal, agriculture, etc. have stalled near term. Focused approach is the best approach to the sector. Watch for precious metals to test the move higher.

Financials (DJUSFN) are stalling on their move above the 200 day EMA and the October high. The regional banks stumbled last week to lead the test. The Fed announcement to keep zero percent interest rates through 2014 was the catalyst to the pullback. Low interest rates hurt the margins for banks. You have to portect against the sentiment as well as the reality short term. Tighten stops and see how this plays going forward. Expect a pullback within the trend.

Basic material (DJUSBM) made a solid move higher last week above the 200 day moving average, but stalled on the Fed news. Still on our watch list to add to positions, but willing to watch and see how it progresses near term.

Energy (DJUSEN) attempted to move higher on optimism, but has stalled along with oil prices. A break above the resistance line of is the key to progressing higher. For now be patient and let this play out. If oil prices move higher watch for a move towards the target of 653 short term.

Gold made a solid move through the resistance at the $1665 mark and thanks to the Fed has moved to $1740. The downtrend line off the August high was broken on the move higher. Watch as the metal faces plenty of technical obstacles in conjunction with the spike higher. Europe/Greece could influence the move higher near term. Expect the Fed stimulus to wear off and watch for a test of the move.

The global markets have made a move that mirrors the US markets. The silence relative to Europe has helped the upside, but as the US markets go short term the global markets will surely follow. The emerging markets are breaking through short term resistance and setting up a longer term opportunity worth watching. Asia is improving as result of China’s better economic data. Scanning the country ETFs gives a good picture of what is taking place in global markets.

Plenty of conversation about the markets being overbought short term. As we all know it can remain so for extended periods of time. The key is a catalyst to change the direction. Europe is brewing as a potential catalyst short term. Earnings are still in motions with the energy stocks starting to announce this week. Plenty of economic data as well with the end of the month. It is important to manage your positions and risk accordingly. There is the potential for a pullback short term, but we have to remain diligent in the process of money management not speculation.

What I am watching today:
EU meeting is tops on the list. The question is will they say or do something news worthy?

The dollar has been falling, but could find some support depending on the talks in Brussels.

Banks. Gold. Interest rates. Hangover from the Fed announcement and Europe.

Economic data has a big week on tap. Personal income and spending start today’s news.

Pullback in the broad market indexes, question is how much.

Earnings offering today from energy, regional banks, and small cap technology for sector insight.

Fitch downgrade on Spain, Italy, Belgium and Slovenia debt after the close on Friday?

Watch and play according to your risk tolerance. Everyone has different trading styles and you have to find what works for you and your personality. Don’t put yourself in positions you don’t understand or take risk you can’t tolerate. Not every trade results in a profit, but controlling your downside risk determines your long term results. Trade smart.