We’re at the height of the summer holiday season, and it seems much of Wall Street is away on vacation right now. Yesterday’s trading volume on the New York Stock Exchange clocked in at less than 800 million shares, marking the thinnest trading since the week between Christmas and New Year’s.

Stock prices remain near the mid point of their trading range and we don’t expect much to happen one way or another in the near term. That said, our indicators suggest share prices should have an upward bias in the short run and there are several potentially market-moving events this week, despite today’s early selling.

One key indicator pointing to further gains in stocks is the strong readings we’ve had on the weekly Advance/Decline Line for four weeks running. That tells us a broad swath or the market is moving higher. Echoing this, yesterday the average stock on the NYSE climbed 1.5 percent vs. a 0.55 percent increase on the S&P 500, which was weighed down by the drop in Hewlett Packard which was sparked by a scandal in its executive office.

We don’t know if the Federal Reserve will resume with quantitative easing with its policy setting meeting today, or if that additional pump priming will come down the pike later this year, but given the economic backdrop, QE II seems all but certain. Keep in mind that QE II will likely be good for stocks and may be why stocks have been as buoyant as they have been.Read more...

The bears continue to have the upper hand in the stock market. Following on last week’s poor showing, which was capped off by Friday’s dreadful action, we had more selling yesterday and so far today have yet to gain any traction. As a result, the market’s near-term prospects are starting to look bleak.

Europe’s problems remain front and center. Hungary (which isn’t a part of the monetary union) and Belgium (which is) have joined the “perp” walk of debt-laden countries bond and stock investors alike are eyeing with suspicion. In Germany, the Merkel government’s plan to help fund a rescue package for the ailing euro-land counties may be challenged in the court system. If successful, the challenge would likely scuttle the whole deal and hasten the unified currency’s demise.

Here at home, Friday’s employment report was an unmitigated disaster. Excluding part-time census workers and the Bureau of Labor Statistics’ guess at the number of jobs added through the creation of new businesses, May’s payroll numbers were essentially flat and far below the consensus forecast. The overall unemployment rate contracted, but merely by virtue of the fact that a great number of people gave up searching for work. Approximately half of the jobs lost since the recession began in December, 2007 are permanent rather than temporary layoffs. So we’re not likely to see a surging rebound in employment anytime soon.Read more...