Pre-Market Outlook

Wednesday May 20, 2009

Futures Report
Moving Averages Squeeze Play
Futures are up this morning, after a mixed Tuesday. The markets started off well until housing reports dampened the parade. But the good news is that the VIX broke through the 30 level. Happy days! Ok. You can stop smiling now, because even though it's technically on a breakdown, it's also getting oversold. Nothing to be concerned about immediately, just tempering that enthusiasm and keeping an eye on it.

 The markets are still overbought on the daily charts, and the RSI and Stochastic are at the top of their cycles. But don't fret over that, it's not a sell signal. You need negative divergences in concert with overbought to start thinking sell. And there are no negative divergences in sight. [Click Images to Enlarge]

What's happening in the market, with these sideways moves, is that we're getting squeezed by the 20 and 50 day moving averages from the bottom, and the 200 day moving average from the top. At some point soon, we can expect a break, and I believe that break will be up due to our upward bias. The Nasdaq, is leading, so it's closer to that break than its cousin the S&P. Just remember that the 200 day moving average is typically an inflection point for the big trading desks, so there's likely to be strong resistance there. If we break away, it will be a strong buy signal.

S&P 500: 8.00
Nasdaq: 3.00
Dow Jones: 70.00

Our favorite stock is UP as of 7:00 a.m. EST
AAPL: 128.55 1.90 (1.50%)

The Nasdaq broke the top of the B [or upward 2] on the 10 day chart. Because of this, there's now a chance that 1778 could get taken out. That would set up an upward 3 with higher highs, and more trading opportunities.

Breaking Financial News
Toll Brothers 2Q Home-Building Revenue Falls 51%

Toll Brothers Inc. (TOL) Wednesday said fiscal second-quarter building revenue fell 51% as the housing market continued to sag and the luxury home builder sold from fewer communities. However, the company said there are some signs that the frozen housing market may be starting to thaw.

"With interest rates at an historic low, home price affordability at an historic high and consumer confidence starting to improve, we believe that more buyers are beginning to enter the housing market," said Robert I. Toll, chairman and chief executive.

Home builders have been slammed the past few years, and lower consumer confidence for big-ticket items and rising unemployment has further hurt the industry and lead to a surge in loan delinquencies and defaults. Still, Toll Brothers has held up better than many of its peers. Source CNN Money

Finance Video of the Day
Blaming, Crediting the PPT
Once again, the PPT gets credit for the rally. Mad props to Richard Suttmeir for getting this right.

Oil UP
59.65 1.15%

Economic Reports
2:00 p.m. Federal Reserve The Fed will issue the minutes from its last policy meeting. Investors will be looking for clues about the economic outlook.

Breaking Apple News
Rumor: iPhone next gen specs, on-sale date July 17

The previously unheralded Apple iPhone Apps blog has a rumor post up regarding the next generation iPhone hardware, suggesting that July 17th is the expected date for the new phone to be on shelves (reasonably well aligned with an announcement at WWDC). As 9to5Mac and Gadget Lab note, most of the covered ground is familiar -- better camera, storage bump, magnetometer & turn-by-turn, video recording -- but there are a few interesting tidbits, including the suggestion of an OLED screen, an illuminated backside logo (perhaps capable of doubling as a photo flash?), the integration of Google Street View with the compass for 'visual intelligence' as in the Android demo, and a built-in FM transmitter.

I'm not sure that an FM transmitter as an onboard capability is such a great idea, considering the percentage of car stereos nowadays that include either an iPod dock connector or an aux-in jack, but maybe it's plausible. Everything else seems to pass the sniff test, although OLED and a lit back panel are an odd combination. If we do see the new device in mid-July, how many of you are checking your contract expirations right now to see if you can pick one up? Mmm-hmm, thought so. Source: TUAW

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