Next Leg Down Could Begin Shortly

Six months into a rally that has yet to see a meaningful downward correction, the stock market continues to move higher, even in the face of weaker than expected economic data. Over the past few weeks, the Citigroup Economic Surprise Index has dipped below zero, indicating that economic data releases in the U.S. are coming in below consensus estimates by market economists.

By Lawrence Fuller:The early stages of bull markets are characterized by stock prices rising in the face of bad news. It is generally accepted that the majority of individual investors are led astray by the negative news flow that accompanies a trough in market prices, selling rather than buying, because they are looking in the rear view mirror, so to speak. That mirror is reflecting current-day reality, while the markets look forward.

At first, hunters rarely actually spot their quarry. They usually track them following various other signs, like disturbed underbrush or the animal’s spoor. To determine the health and safety of any given market investors have literally hundreds of economic indicators. Part of the problem with these statistics is that they are usually compiled by some branch of the government. Their accuracy varies widely from country to country. Then interpreting these statistics can be a challenge. Different economists and analysts can read totally divergent meanings into the same numbers.

By Dr. Duru: The Federal Reserve’s second phase of quantitative easing (QE2) is slowly becoming a distant memory. Signaled at the end of August 2010 from the annual confab in Jackson Hole, WY, and officially launched in November 2010, QE2 helped to arrest what looked like at the time a continuation of a steep slide toward 1,000 or so for the S&P 500. Instead, the stock market bottomed and raced almost straight up until hitting a brick wall in February, 2011.

By Posts At Eventide: Apple (AAPL) ended a challenging week on Wall Street at $373.62 per share, down $3.75 on the day and off $16.86 for the week. Friday's closing price represents a multiple of 14.79 times 12-month trailing earnings of $25.26. At Friday's closing price, the company's hefty cash position of $81.21 per share is equal to 21.73% of the share price valuation.

Oil: Spot crude oil prices have moved higher from a falling wedge pattern that appeared on but have stalled at the psychological $100 price level. Given the measured move from the chart pattern and the current resistance levels, a likely target would be the $104.50-$105.50 range between the mid-May high and the mid-April low. Support is found at the falling wedge line which comes in just below $92.50. Forex traders who missed the initial breakout may be patient and wait for a pullback to the wedge line where the pair could bounce higher which often occurs with a wedge chart pattern.

Calafia Beach Pundit submits: According to March data released today, U.S. housing starts have risen 30% from their all-time low (April '09). In addition, building permits increased 38% over the same period.