Next Week

by Larry Levin

NEW YORK (MarketWatch) -- Another week light on economic data might provide a few more reasons for the stock market to continue easing, although bulls aren't ready to give up on a two-and-a-half month rally that has lifted the broad market more than 30% since early March.

Over the past week, investors began to re-assess recent optimism over an economic recovery, after mixed results from retailers and the government's tally of April retail sales failed to live up to expectations.

"I think there's still a lot of upside to this market but we're in quiet period right now," said Bob Pavlik, market strategist at Banyan Partners. "We saw profit taking after last week's run-up and we've lost a bit of steam, and people are reconsidering whether the economy is as strong as we thought it was."

Stocks gave back some gains from the previous week. The Dow Jones Industrial Average fell 3.6%, its first weekly drop in three weeks. The S&P 500 index lost 5%, also its first weekly loss in three weeks, and the Nasdaq Composite dropped 3.4%, representing its first weekly loss in 10 weeks.

After more than two months of celebrating signs that the economy had stopped deteriorating quickly, investors are now looking for signs it might actually improve.

"Investors were reminded this week that 'less-bad' doesn't necessarily mean good," said Sal Guatieri, senior economist at BMO Capital Markets. "American consumers, though emerging from their deep hibernation of late last year, are still hunkering down," he said, referring to the retreat in April retail sales.

A light economic calendar next week will provide few clues for investors to make up their minds. On Monday will be the May housing market index from the National Association of Home Builders. Tuesday will bring April housing starts and building permits.

On Wednesday, investors will parse economic projections from the minutes of the Federal Reserve's last monetary policy meeting in late April.

Thursday will bring weekly jobless claims, a manufacturing index for May from the Philadelphia region, along with leading economic indicators for April.

"Investor psychology has drifted from widespread fear to healthy skepticism," said Jack Ablin, chief investment officer at Harris Trust. "This contrary indicator certainly doesn't reflect the ebullient optimism often associated with market peaks."



Previous Day's Trading Room Results:

Trade Date: 5/15/09

E-Mini S&P Trades*
(before fees and commissions):


1) VA buy @ 9:50am at 893.25 = -1.50 (1 lot)

2) IDVA buy @ 12:20pm at 882.00 = -1.25 (1 lot)

3) Algorithm positions (2)...combined Secret's and Algo total...-1.25


Electronic (YM) Mini-Dow:

1) None today



Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!