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Last week SP500 fell by 1.9%, MSCI Europe Index (EFA) by around 2.6% and gold fell by 1.83%. The Chart technicians would contend that the "Neckline" of Head and shoulder formed in SP500 & in Gold charts are broken. That means Bearish forces are stronger than the Bullish ones.

That picture might be clearer if you were to look at Macro fundamentals of the economies around the world. With Unemployment rising and more stimulus packages being released, it is hard to gain confidence in the markets. Naturally the Michigan sentiment Index came in less at 64.6 than expected 70.

While Commodities, Gold and equities continued their declining trend from the reversal point in early June, Bonds have been better off. Long term treasuries (TLT) rose 2.2% last week, and ten year treasury yield dropped from 3.49% to 3.3%. This should be helping people looking Mortgage Refinances, and the weekly mortgage applications survey registered an increase last week.

The second quarter Earnings season began with Alcoa doing better than expected, but the expectation itself was so low. What good is to beat the expectation if that cannot deliver higher employment and get us out of this crisis. Will this be a trend for 2Q earnings season?

Though Inflation is expected to be low, lets watch for the CPI reports this week.

Last week's market Internals:

NYSE, (New Highs - New lows), 5 DMA = -0.6

10 year Treasury yield = 3.32%
Short term bond rate = 1.81%

Volatility Index, VIX = 29.02
Put/Call Ratio, total of equity/Index = 1.05
Bull/Bear Ratio, Investors Intelligence survey = 1.41

US Dollar, 5 DMA = 80.39
Gold, 5 DMA = 89.7

Next Week's economic calendar:
- PPI, Core PPI, Retail Sales - 7/14
- CPI, COre CPI, MInutes of FOMC meeting - 7/15
- Housing Starts - 7/16

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SP500 lost about 2.4% last week and small caps around 2.6%. Long term treasuries gained modestly while Gold, Oil and commodities suffered. Sinking US dollar is making foreign investment little more attractive for US investors. However, last week saw decline in the equities all over the globe.

The biggest impact was from the Unemployment report that was 26 year high at 9.5% and 467,000 more jobs were lost, much more than expected. Since last week was a short week, and usually volume is lighter in these short weeks and any direction the market takes might have to be confirmed this week.

The strong of 7 year notes auction led to the decline of 10 year yields and the Mortgage Backed securities yield. China stated that it wont diversify away from US dollar and hence causing demand for Treasuries. With inflation fear out of the picture, weak jobless numbers and still declining Housing market, the mortgage rates may lie low for few more weeks.

Last week's market Internals:

NYSE, (New Highs - New lows), 5 DMA = 18.6

10 year Treasury yield = 3.51%
Short term bond rate = 1.975%

Volatility Index, VIX = 27.95
Put/Call Ratio, total of equity/Index = 1.05
Bull/Bear Ratio, Investors Intelligence survey = 1.38

US Dollar, 5 DMA = 79.96
Gold, 5 DMA = 91.83

Next Week's economic calendar:
- ISM Service - 7/6
- Crude Inventory, Consumer Credit - 7/8
- Michigan Sentiment, Trade Balance - 7/10
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We have reached the last week of first half of 2009 & end of Q2 2009. And Q2 is heading for one of the best equity performances in many years. Lets see where it stands next week.

The fed announcement last week clarified that "substantial resource slack" will keep inflation at bay. A stronger foreign demand for 2 year note was a good sign and kept the interest rates lower. Fed said they expected that the rates will remain low for a while.

The 30 year mortgage rates edged slightly up to 5.42% from 5.38%. With a lot more US debt issuance to come the potential for rising mortgage still remains.

Checking the technical indicators on the SP500 chart, we are at a point where the market is kind of indecisive and waiting for more info to take a direction. Elliot wave interpretation of sp500 can lead to a downward move of Wave C, but the 200 DMA is providing support to the S&P 500 prices.

Next week's the unemployment report is the biggest one and can provide direction that the market is looking for.

Last week's market Internals:

NYSE, (New Highs - New lows), 5 DMA = 7.8

10 year Treasury yield = 3.52%
Short term bond rate = 2.08%

Volatility Index, VIX = 25.93
Put/Call Ratio, total of equity/Index = 0.81
Bull/Bear Ratio, Investors Intelligence survey = 1.52

US Dollar, 5 DMA = 80.25
Gold, 5 DMA = 91.84

Next Week's economic calendar:
- Consumer Confidence, Case Schiller Home Price Index 6/30
- ISM Index, ADP employment change in 7/1
- Unemployment report, 7/2

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