Fireworks   With the Independence Day holiday this week the market celebrated early with a bang to end the month and the quarter with a nice 1-day rally. The US market will close at 1:00pm Tuesday July 3 and remain closed on Wednesday July 4 for the holiday. We begin a new month and the week being a short one may continue higher if buyers don't think too deeply about the European problems. It was noteworthy that as we pointed out in the Friday video, the Russell 2000 had its 50-day EMA almost touching the 200-day EMA and often that produces fireworks and big moves as the market wishes to separate the 2 averages. As is often the case the rally is blamed on news rather than technicals. We contend however that very often news seems to follow technical and many times not the other way around.   Mike Burk tells us that since 1928 the SPX has been up 57% of the time in July with an average gain of 1.2%. During the 4th year of the Presidential Cycle the SPX has been up 48% of the time with an average gain of 1.7% (helped considerably by a 32.6% gain in 1932). The best July for the SPX was 1932 (+32.6%) the worst 1933 (-11.1%).

An interesting article in Rolling Stone on June 21, The Scam Wall Street Learned From the Mafia - How America’s biggest banks took part in a nationwide bid-rigging conspiracy – until they were caught on tape.

Before we get to today's charts some  entertainment. 

First Aid Kit   is a Swedish folk duo composed of sisters Johanna  and Klara  Söderberg. In the summer of 2008 they did a cover of "Tiger Mountain Peasant Song" by Fleet Foxes and put it on YouTube. That really boosted their worldwide recognition as it now has over 3 million views. They have close vocal harmonies and what is written as woodsy, folk-influenced songwriting. They will be performing in the USA  from July 26 to August 3. See their official website http://thisisfirstaidkit.com/  Send them a tweet @FirstAidKitBand  This video has for its background song  one of their originals named "Wolf". The video is comprised of 179 short clips from mostly time-lapse videos that had been posted on YouTube. The editor is Luc Bergeron @Zapatou who has a passion for editing and this makes for a wonderful kind of travel log of scenes from around the world.

New claims for unemployment fell somewhat for the week but nevertheless remained slightly higher than predicted, according to figures released by the Labor Department. The DOL put the level of initial unemployment claims at a seasonally adjusted level of 386,000 for the week ending June 23, a decrease of 6,000 from the previous week's revised level of 392,000.  graphs - RTTNews

U.S. personal incomes grew by slightly less than expected in May but the slower than expected growth did not bring down consumer spending levels. According to figures released by the Commerce Department, U.S. personal income increased by $25.4 billion or 0.2 percent for May, with disposable incomes increasing by the same 0.2 percent margin.

The Institute for Supply Management-Chicago business barometer rose to 52.9 from 52.7 in May, beating economists' forecasts for a slight tick down to 52.5. A reading above 50 indicates expansion in the regional economy.

Confidence among U.S. consumers declined in June to the lowest level this year as Americans grew more pessimistic about prospects for the economy. The Thomson Reuters/University of Michigan index of sentiment fell to 73.2 this month from 79.3 in May. The gauge was projected to hold at the preliminary reading of 74.1 

U.S. economic growth in the first three months of the year came in line with expectations, according to a report released by the Commerce Department, with the pace of growth unrevised from the previous estimate. The Commerce Department said that GDP increased at an annual rate of 1.9 percent in the first quarter compared to the 3.0 percent growth seen in the fourth quarter. The unrevised pace of growth came in line with the expectations of economists. Downward revisions to exports, consumer spending, and private inventory investment were offset by an upward revision to non- residential fixed investment and a downward revision to imports, which are a subtraction in the calculation of GDP.

Today's chart illustrates how the recent rise in earnings as well as recent decline in stock prices has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive. From 1900 into the mid-1990s, the PE ratio tended to peak in the low to mid-20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to extraordinary levels during the financial crisis (late 2000s). With the exception of a brief period in late 2011, the PE ratio is currently at level not seen since 1990.

This past week's  sectors.

This past week's indices  - 

Last week we wrote, "While surely not conclusive, the monthly chart for the Dow, NASDAQ and S&P 500 are above their center Bollinger bands and this opens the door for a possible summer rally." Especially after the rally on Friday all the major indices are now well above Their center Bollinger bands and we will look to see if we can get some continuation during this holiday shortened week. Oil had made it to the lower Bollinger band and had a significant pop, leaving a hammer candle, but it has resistance just overhead.

On the 60 min. chart we see that Monday had the candles touching the lower Bollinger band with a rally into Wednesday and the drop on Thursday, setting up for the big move Friday. They did run above the bands but then went sideways long enough to leave room to go even higher. The RSI in this time frame is in over bought territory so we expect some pullback in the first part of the week. 

The Dow ended the week slightly back over the 20 week moving average, though under the high from the previous week. The volume was also lower than the previous week. A close back over 12,900 would most probably see it   test this year's high. 

This longer term daily shows the 400 point space above. In order to test this year's high the Bollinger bands would have to curve back up and they  they would do if we haved a series of sharp spikes upward. 

The Dow futures shows the dip in June took it down to test the 38% Fibonacci retrace level, which was also support and the current rally into resistance. 

This shorter time frame chart shows the this week's  rally started on Thursday with a successful test of the low and positive RSI divergence. In its move back up found resistance at the 38.2% level, then the 61.8% and briefly at the 78.6%. It could not breakout once it got to 100%. Shown here is the first resistance level on a breakout, and that would be the 127.2% at 12,953. 

The transportation average dropped towards the 200 week EMA on Tuesday, but recovered quickly and ended the week 2.5% higher 

The utility average had dropped below breakout support going to test the 50 day EMA and then put in a 4-day rally with the highest volume on Friday. 

The NASDAQ summation index signaled a long in the first week of June, remaining so this week. 

Two views of the moving average of the number of new highs on the NASDAQ. This first one showing the nice rise followed by sideways consolidation and the jump up on Friday. 

This longer-term view in gray shows the NASDAQ bounce at support and in blue the new highs average with its run now just a bit over resistance.

The resistance on the weekly NASDAQ chart from earlier in the year was 2888 and the close on Friday was clearly back over that level. 

60 mnute NASDAQ chart and a Williams indicator buy and now then we see it a little  extended from the big move on Friday, leaving a small gap also between the  closing high and the previous high at 2942. 

The NASDAQ 100 futures perhaps now in a bull flag so will watch for a breakout and a confirm  of the move if it goes over 2650.

The volatility index had spiked this month over 25, but settled on Friday at 17. 

The semi conductor index still out of favor though it did close over its 200 week EMA. It is under its 50 week EMA.

Last October after the Netflix flicks decline from 300, we thought it may bounce from that $90 support but the position was stopped out as it dropped to the November low, where the second bounce held and rallied over 100%. It tested that November low and has moved up 10 points from there on declining volume. It is not a strong chart, but there is positive divergence still in RSI and it is at least worth watching, for some volume improvement. 

The NYSE new highs minus new lows line had a big spike on Friday taking it above its Bollinger band and above levels of recent short term tops in the indicator. 

Here is the NYSE on top as it approaches some horizontal resistance and then the overhead trendline. In the bottom of the chart is the moving average of new highs minus new lows slightly above its trendline. 

61% of stocks on the NYSE he are now trading over there 50 day moving average. 

The lazy trading chart having bounced at support has now rallied back up to the 20 week EMA and a bit above its long trigger basically at the same range it sold at during the decline. 

The S&P 500 has closed over the 20 week EMA  by almost 2 points the with some perhaps larger resistance just overhead at the green line.The volume this week was less than the down volume last week. 

This daily S&P 500 chart shows the close close to a possible breakout level, which could take it back to 1400 or the yearly high. 

A closer view of that charts showing the 13 day EMA just $.27 below the 34 day EMA. So without much movement higher, there will be a bullish crossover. 

The 60 min. S&P 500 chart shows it has now, from the June low, retraced back up 61.8% of the move. 

The 15 min. S&P 500 with its dramatic move on Friday. 

The S&P 500 futures during this decline dropped to support and the 38.2% retracement of the move since last October. 

A shorter time frame look at the S&P futures with the RSI crossover buy, from a 30 min. chart on on Thursday and the continuation to the breakout level on Friday. The next projection level short term would be the 127.2% at 1371. 

The small caps had been underperforming the large caps lately and was unable to get back above the 50 and 200 day EMA. We said in the Thursday night video that as the 50 day and 200 day EMA were basically touching, then it would be common to see some big fireworks to try and separate the two and that would work to the upside. We got just that as it rallied up 22 points. If you're trading futures this is $2200 for each futures contract that ties up about $500. So a great day if you were long. The Russell here has also broken above the down trend line for the year. So on a pullback watch it to become support. 

In the 60 min. time frame we have another down trend line that it ran slightly over on Friday. 

This 15 min. Russell 2000 chart shows it back inside this parallel channel with resistance at the top channel line and some new possible support around 790. 

The triple X ETF for the Russell 2000 ran back up to the 61.8% Fibonacci level, which is also the top of this parallel channel. So don't be surprised if we have some pullback from here. 

The banking index with a longer term overview of where it stands at the moment. 

Here we see the banking index at horizontal resistance and just overhead the top parallel descending channel line. 

During the stock market pullback the retail sector has remained surprisingly strong having declined only three points and now it is only $.50 away from making a new high. 

The FTSE has recaptured the 200 week EMA a that has overhead 50 week EMA  yet to go. 

The Canadian venture exchange closed down again, but has a  small hammer candle and closed over the lows of the week. 

The Shanghai stock exchange still in negative form, closing under the latest broken support. Hard to imagine sustained US market progress while this important exchange is so weak. 

The bounce in our commodities ETF came about a point below 2011 support, with a 5% rally this week. RSI moved back over 30. 

Crude oil had a 6% rally this week which was quite expected as the bounce was near the 2011 low and note it is still bearish, closing under the 200 week EMA and of course the broken trendline. 

The weekly chart shows the drop from the bear flag two weeks ago with the countertrend rally this past week. It will have to move back over the 200 week EMA  to provide much significance. 

The daily crude oil showing this one day move going right into resistance. 

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The crude oil futures chart we had posted on the twitter stream as this bounce was  expected as it had successfully tested the October 2011 lows. The RSI is still quite oversold and the price is in some resistance area. A break above could take it back to 90 and the 38.2% retracement area level. 

Natural gas had one significant leg up from $1.90 and a corrective leg down and now it has been moving back up again, running this week to the 50 week EMA a and pulling back slightly. 

The nat gas ETF ran back to test its May highs and also has been consolidating the last couple of days. 

As the triple X long for naty gas dropped under $46 support this week, we posted a chart with retracement levels and support at $42 and $41. Either one turned out to be a very good buy as its close back up at some resistance above $45. 

Again this week gold tested this descending trend line hitting it on Thursday with a big 44 point rally on Friday running up to the 50 day EMA. 

On the shorter time frame chart gold had looked quite bearish and then ran down to our 127.2% projection on Thursday and rallied, allowing the RSI to go back over 3o for a buy and that proved to be an excellent trade as it moved up over 50 points. 

The gold ETF shows that even with the  rally it remains under the broken trendline. 

With the rally in gold the gold miners ETF moved up less than half a percent on low volume this week. 

That move was enough to produce one green bar on our mechanical chart. 

Silver futures having dropped lower while RSI was higher, had a pretty decent rally running above the 38.2% Fibonacci level and closing back just under it. 

The movement in silver was enough so that the ETF closed back over the trendline as shown. The RSI on the weekly chart never dropped below 30. It does not have to but would be more convincing if it did for a longer-term low. 

The movement was not quite enough to bring the mechanical chart back to make a  green bar. 

Copper had been consolidating bearishly under its 200 week EMA  but the rally this week brought it back above for a close higher than the past six weeks. 

Palladium did close above its low for the week, but was still down 4.5% on higher volume. 

The euro in its descending parallel channel did rally this week back up into this resistance area. A further movement may take it back to the top down trend line. 

The euro futures chart showing this short term bounce the last two days. A break above the trend line would rally the US markets as well.

On the shorter time frame chart we see the big rally after it crossed back over this short term trendline. 

The US dollar lost 1.71% this month, but ended the month still over this broken trendline, which keeps it a bit bullish. 

The shorter time frame chart shows it also closed a bit over its 50 day EMA and horizontal support. 

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Check the updated Earnings Calendar on all overnight holds.

This week's economic calendar for the USA.