Issue 137
June 11, 2012

i On The Market - Weekly Update

Last week was surprising to iStock. When stocks got crushed on the bad, 69k jobs number, the markets took a hit because of real, hard news. However, all last week's gains came on the back of hopes and rumors of more Wall Street welfare i.e. free digital dollars and euros.

However, Ben Bernanke and his Beige Book put some water on the QE3 embers with reports of an economy supposedly improving in April and May. The up-tick means the Fed will not ease until the economy really starts sucking wind. That might not be too long if you think about China's interest rate cut. The rate reduction is an admission that the Chinese economy is slowing faster than anticipated.

The US can't possibly decouple from a recession in Europe and China.

Additionally, Spain came begging for $120 billion after Friday's market close. On the weekend, their political leadership warned the citizens of tougher times ahead. Investors might wish to pay heed to the warnings, remember Greece!

While last week's rally turned out to be one of the strongest weeks of 2012, it did little to improve the technical state of the indexes. In fact, as the market went higher and higher, volume withered and withered. That's just not a sign of confidence or commitment; rather, it is a sleight of hand; watch these shiny gains, but don't pay attention to their sandy foundation.

We would have a little more appreciation if the indexes at least managed to start a new trend by topping May's highs, but that didn't happen either. What did happen, however, is that the NASDAQ, Dow and S&P all closed up on their 26-day averages, which is not uncommon in a counter rally within a longer-term down-trend.

That's not to say stocks won't go higher this week, too. Like last week, the indexes could move higher, maybe to the respective 50-day averages. This is especially true if the Street believes the world is on the path to saving Spain, at least for now.

However, the volume picture tells iStock the current rally will be more like generic batteries than ENERGIZERs. You can't tell the difference at first, but the real thing is far more durable, doesn't disappoint, and costs less money in the long run.

MARKET TYPE: Sideways Volatile

Despite last week's big gains, this indicator barely saw its needle budge above last's week's bear reading. If stocks fall, the market type reading will threaten bear status again. If not, it could be stuck in sideways mode for weeks.

MARKET LEADERSHIP: Buy

This indicator was on the mark last week and remains in the go column. In fact, this week's ranking is higher than last week's.

MOMENTUM MODEL: Sell

Of all our market measuring sticks, this one gained the most ground last week; however, it would take another 2-3 solid green days to flip MO to a bullish reading.

Market watchers will get a good read on consumers this week with Retail Sales results due on Wednesday, Consumer Comfort on Thursday, and Consumer Confidence on Friday. If the average Joe & Jane are spending freely and feeling swell, the headlines will help build the bull story. However, iStock thinks the languishing jobs market will dampen spirits and the results will show up in the trio of consumer related news announcements. We'll have more as the week moves along.

iStock Of The Week

Stocks are likely to rise on hopes that Euro-aid for Spain's banks cures bad debt ills. It may for a while and stocks could benefit until the medication wears off.

From a purely technical standpoint, Whole Foods Market, Inc. (WFM) is sitting on the launching pad with T-minus 5, 4, 3… until lift off. If the healthy lifestyle grocer's shares can get the better of $91.50, then they are likely to seek triple digits in short order.

Despite the overall market's woes, WFM has been trending higher and has a potential bullish pennant pattern. If equities do head higher, Whole Foods Market, Inc. (WFM) could be a major beneficiary.