Market Summary for the week and a look ahead

The stock market hype was high again this week. many comments about how things were looking better, but the actual data showed we stood still this week. The spin masters were out in full force as economic data was released earlier in the week and there was no shortage of spin. Here are some examples. Consumer Confidence numbers released this week came in at 69.0 versus last month at 68.7 but to hear the headlines you would think the Consumer is doing a lot better. First of all the data increase is not statistically significant of a real move up. Secondly, when they announced Retail sales up 0.5% for May, many put the 2 pieces of data together like Larry Kudlow of CNBC and said Consumers are Buying again! The truth is the reason that Retail sales were up was due to increased purchase of Energy as Energy costs, especially Oil and Gasoline, have soared again recently. Anyone filling their cars knows this. Actual sales of things like Electronics, Furniture and Appliances, so called discretionary spending, was down in May!

Consequently, the stock market did not really advance for the week as the chart of the Dow above shows. In fact there is much to be concerned with looking at that chart. Notice the Dow over the 2 past weeks is higher than the previous period for this one month chart. Also notice the Volume on the lower section has decreased significantly as the red line shows average volume for the previous month. When price goes up and volume declines it is a sure Bearish sign.

I am still holding my TZA shares which are Shorts of the Small Cap. I also purchased 10,000 shares of Capstone, symbol CPST, for $1.15/share yesterday. I plan to add to my position in these shares going forward. The maker of mini Turbine engines successfully completed a test by Ford in the UK in their Ford S-Max 7 passenger car. This engine is 50% less weight than a standard engine, which increases both the miles per gallons achieved and also reduces significantly emissions and harmful Carbon dioxide in the environment. If you wish to see a 42 second video clip on the car click on this Capstone link.

Now looking ahead what does that mean for the market? Well we are going into Options Expiration week. Not only will this be an expiration of Options for the Month but also the Quarter, Most likely Triple Witching Options expiration will happen on Friday, June 19th. I expect increased volatility this coming week. Currently the VIX Index, a measure of volatility, closed Friday at 28.15 and I expect this number to go up during the upcoming week. The Put to Call ratio for all Options closed at 0.86, however the Index only Put to Call ratio is at 1.27 as of Friday's close. I do believe we will see a leg down to retest the lows as I have said many times in the face of a market that just goes up or stays flat, as it did this past week. I just believe that reality of the economic conditions are eventually going to set back in to the markets and a selloff is inevitable. Having said that, the market could break through resistance this week and we could end higher. But I do not believe we will go above the previous range of 9,300 on the Dow.

My Beacon Power shares, symbol BCON, did well this week, closing Friday at $1.02/share. back on March 4th, this stock was at $0.34/share. This is a gain of 200% from there. This stock should rise to well over $2-$3/share in the coming year, as they get entrenched in building out their manufacturing capabilities for the Grid. If you would like to see a short video clip on their Flywheel technology and facility click on this Beacon Power link. When you go to their site be sure to click on each of the orange/gold rectangular boxes for each of the short video clips. It's well worth your time and the company is a good investment for any who believe in Green Technology and President Obama's Energy initiatives.

Market Outlook for next 3 plus weeks

Well the week was a calm one with the range on all 3 indexes much tighter than in previous weeks and months. It got everyone settled down but it was difficult to make any money in the market with such a tight range. We have not been able to get above the 60 day Moving averages. We have settled in between the 40 Day and 60 day Moving averages. With the coming slow 2 weeks of the holidays, I don't see much going on except tax loss selling by individuals. Then in the first and second week in January I see a pullback in all three of the Indexes.

The main indicator for what was happening this week was the Volatility Index, symbol VIX. It went down to close at 44.93 for the week. It opened the week at about 56 and closing at about 45 results in a 20% reduction in Volatility. We are not yet back to the August lows of 20 but the trend continues down. As the Volatility Index drops, it is more difficult to make any money on Index trading of the Dow, Nasdaq or S&P 500. So that is why for the week the ETF's didn't gain much nor lose much. I am hoping for a breakout the first 2 weeks in January. That will be the time to cash in to the upside should that be the direction or to the downside, which I see more likely.

Several stocks I watched this week were these. Ford for example has not returned to where I sold it, $3.26. The bailout created some buzz at the opening but then fizzled as I had predicted. I also own a stock called Beacon Power, symbol BCON. It has been shorted since July and that has driven the price down significantly. But there was life returning to the stock this past week on increased volume, a good sign. I look in the coming month for a retest of the lows in MGM timed with the market drop. I have heard the impact continues on the Stip in Vegas so I think they will have a disappointing holiday season.

Unemployment is rising with no relief in sight going forward. This is going to have a continued negative effect on the psyche of everyone. Just yesterday while Christmas shopping I overheard people talking about the poor state of the economy, their jobs and concerns they would get let go by their employers but were going to buy a few small presents for their kids anyway. I have never heard anything like this before during Christmas shopping. I heard similar conversations in 2 separate stores. That stinks. Let's at least try to be more positive out there folks!

Merry Christmas, Happy Hanukkah and Happy New Year.