It’s likely to be another volatile week on Wall Street as a number of key economic reports will certainly have an impact on the market. Although the economy is chugging along, in order for the market to break through key resistance levels, the housing market will need to improve before a rebound in the economy can be considered a success.

The housing market takes center stage on Monday with Existing Home Sales. The key will be the supply numbers for unsold homes. Sales of existing homes in the US went down by 2.04% last month (from May to June), to 4.86 million homes.

New Home Sales come out on Tuesday. Sales of new homes fell less than expected last month but inventory keeps declining which is not a good sign. New home purchases dropped 2% in the South and fell about 1% percent in the West while sales rose a little over 5% in the Northeast and 2.5% in the Midwest. These two reports will likely set the tone of the market for the rest of the week. Consumer Confidence will also be released on Tuesday.

Wednesday brings the Durable Goods report. Durable goods are an indicator of the number of new placed with domestic manufacturers for immediate and future delivery of factory hard goods. This report is an early estimate and is revised a couple of weeks later for a more accurate and complete report. New orders for durable goods were pretty strong last month, as we witnessed a 0.8% jump in June.

Thursday is Gross Domestic Product (GDP) and Jobless Claims. GDP is the best measure of our economic activity and encompasses every sector of the economy. GDP growth is expected to be revised up to 2.7% annual growth from an estimate of 1.9% which would normally mean good news. However, most of the growth is coming from outside the US. Although the job market is improving according to some economists (sly grin), we have gone five straight weeks with claims levels above 400,000. Until we get back under that number there is no improvement.

On Friday we get Personal Income and Outlays, and the Consumer Sentiment report which is directly related to the strength of consumer spending. These two reports will either save the market or add to its misery by the time the long holiday-weekend approaches.

Rick Rouse
Rick@OptionsMentoring.com

The market was enjoying a huge rally before the Fed meeting and extended that rally when news broke that the Fed’s Open Market Committee held rates at 2%. The committee is made up of six members and all but one agreed to leave its key rate where it stood. The prime lending rate for consumers and businesses remained at 5%. The prime rate pertains to certain credit cards and home/ business equity lines of credit.

These Fed meetings are always made out to be so dramactic but we all knew that the Fed would leave rates unchanged. Everybody talks about “what the Fed says in its statement” will be key but the bottom line is if the Fed would have raised rates, it could have been a haymaker that the market would not have seen coming. With rising unemployment, a shaky economic oulook on growth, and higher inflation, the Fed really had no choice but to leave things they way they are. The next Fed meeting is scheduled for September 16 and I don’t expect them to raise rates then either. In fact, I would expect them to remain unchanged through the rest of this year.

With the Fed report out of the way and a continuing decline in oil, the Dow rallied another 100+ points after the Fed meeting. At the end of the day the Dow was up 331 points to 11,615. The Nasdaq followed suit with a 2.81% increase, or 64 points, to close at 2,349. The S&P 500 was up nearly 36 points and finished the trading session at 1,284. Oil traded as low as $118 a barrel before settling at $119.17, down $2.24.

The market volatility will continue and to be quite frank, don’t let it scare you. Volatility is a great money-making opportunity. Today’s market is for the nimble traders, ones who can make quick decesions. The long-term buy and hold investors are out of the market and have been for quite some time now.

Today’s action was a bullish sign and for now we can ride the wave higher with some of the call positions we have open. However, the market can change direction quicker than a speeding ticket so I wouldn’t be surprised if this rally stalls. The first couple of weeks in August are historically a bullish few weeks so we may have more room to run before that happens.

Rick Rouse
Rick@OptionsMentoring.com

The U.S. unemployment rate increased 5.7%, from 5.5% in June, according to the Labor Department. Unemployment is now at its highest level in four years as employers cut non-farm jobs for a seventh straight month.

The July job loss was not as bad as Wall Street feared and the rise in the unemployment rate can be attributed to some of the younger generation looking for summer jobs. There were 51,000 jobs eliminated in July, bringing losses for the year to 463,000. The last time the jobless rate was higher was in March 2004 when it hit 5.8%.

We were already looking at a higher opening this morning and we may still open on the plus side as the futures market has held up well. The S&P 500 futures rose 3.6 points to 1,270.30, Nasdaq 100 futures rose 2.5 points to 1,856.50 and the Dow futures rose 46 points after the report.

We may get a higher open but the news might wear on the market after we open.

Rick Rouse
Rick@OptionsMentoring.com

The market is on the upswing as we head to lunch following yesterday’s huge loss. Oil is down a little over $3 to $121 level and the talk is it could be on its way to $100 a barrel. Just a few weeks ago we were approaching $150 so the continued slide in oil is having a positive affect on the market.

The market also got some good economic news as the Conference Board’s July index of consumer confidence rose slightly to 51.9 from 51 in June. Consumer spending accounts for more than two-thirds of U.S. economic activity so the uptick was welcomed news.

The next stop for oil would be the $117 level which could pave the way for a slick road to $100 a barrel. Of course, the market may be getting ahead of itself but comments from OPEC’s president that oil’s current price is “abnormal” and could fall to $70 or $80 is fueling the fire. Oil is at a 10-week low and the recent slide has also coincided with a stronger U.S. dollar.

The dollar is at a 5-week high and a stronger dollar is pushing commodities prices lower. Copper, gold, and natural gas are all significantly off their highs of just two weeks ago. Barrick Gold (ABX, $42.63, down $1.57), Goldcorp (GG, $39.55, down $1.40), Gold Fields (GFI, $11.97, down $0.09) and Newmont Mining (NEM, $47.70, down $1.41) are all trading lower today.

Today’s rally can certainly be contributed to the fact that oil is lower. But any sustained rally is only likely to occur if oil continues to retreat. It’s tough to say if we get a straight drop to $100 a barrel for oil but if we do and it can stay at $100 a barrel or below, it will certainly help stabilize the market over the near term.

Rick Rouse
Rick@OptionsMentoring.com

The market tried to extend yesterday’s gains this morning after a better-than-expected retail sales reading but is trading slightly lower after digesting the news. The Commerce Department said US retail sales showed a 0.2% drop but was better than the 0.3% decline forecast by Wall Street.

The real problem came from the auto-makers which reported a 2.8% decline in auto sales which was their biggest setback in 10 months. The weak economy and climbing gas prices have cooled the demand for new cars and its only going to get worse some fear.

If you take away auto, retail sales actually rose in April by 0.5% as sales at general merchandise stores kept pace with the theme that consumers are buying in bulk and looking for discounts. This was much better than the 0.1% rise we got in March.

Rick Rouse
Rick@OptionsMentoring.com