Who remembers Glinda the Good Witch? 

"Close your eyes and tap your heels together and think to yourself - There's no place like home, There's no place like home..."

As the gov't reports the largest monthly gains in housing prices in 7 years!!!

It was another stunning Tuesday......that makes 20 Tuesday's in a row where we have seen the market move higher? What gives? So many will explain it as the upbeat economic news (better consumer confidence and rising home prices), that sparked a rally, as the DOW set another record high, but what is interesting to note is that sellers dominated the equity markets yesterday. It was a rally that lost steam all day long. You see, after the market opened and stocks gapped up strongly - sellers stepped in, capped the rally and drove equity prices down all day long – not into negative territory, but clearly creating a bearish candlestick pattern* in the charts. *(Candlestick patterns are graphical representations of price moves over a given period of time and offer clues that some believe can predict future movement.....this is not an exact science, can be subjective and must rely on "predefined rules" that match any one of 42 patterns.)

The highs of the day were reached well before the first hour of trading. Then the sellers took control, pushing prices lower all day long. Yes, the DOW managed another record high and was the only major index to do so which suggests that an end-of-month asset re-allocation is taking place. Risk is being traded for the safety of blue chips as we move into month end "window dressing", even though a bearish pattern is beginning to take form.

Looking at the current rally that began in November and now 7 months old, you can see a different pattern developing*. If you look at the candlestick patterns of the last 3 pullbacks (Dec, Feb and April) - there were no "tails" shooting up, suggesting the "buy the dip" mentality. As prices descended the buyers quickly jumped in and reversed the course of the move. Now look at the most recent pattern - last week and yesterday. The tails are beginning to shoot upwards - suggesting that any attempt to "buy the dip" is being met with more aggressive selling during the bulk of the day.....The strongest stocks in the Dow allowing it to make a new high while the broader S&P and the tech heavy Nasdaq remained under pressure.

*This type of pattern is called a "shooting star" as the long upward tail implies that the market was testing (to find) resistance - and when it found it the sellers took advantage and began to unload - thereby "rejecting" the continued move higher and with the pressure remaining the "buy the dip" mentality was tested.....This morning we see that in the futures...

This morning, S&P futures are off by 11 pts....trading at 1643....so what's the complaint now? Is the market continuing to thrash around as it looks for clarification? Is the thinking this morning that the FED will once again talk of retreat? Again - do you think that these 2 reports will cause an immediate FED reaction? This as the OECD (Org of Economic Co-operation and Development) warns of the "potential instability" in the US bond market arising from a tapering of QE posing a major threat to the outlook for the global economy....

"Exit from unconventional monetary policy may be difficult to manage and less smooth than desirable, possibly leading to sharp rises in bond yields and serious negative consequences for growth in a number of advanced and emerging economies.....If yields increase strongly or abruptly, for instance due to investors being surprised by the timing or pace of policy changes, or if higher interest rates expose vulnerabilities in the financial system, it could be disruptive" - Pier Carlo Padoan Deputy Sec General and Chief Economist at OECD.

Back to the chart - if you notice - those three pullbacks (Dec, Feb, and April) all happened at about 45 days into the rally, all saw the pullback take us back to the 50DMA and NONE of them had that "shooting star" formation, in complete contrast to the formation occurring now. We are about 45 days into this rally, with a clear negative technical pattern developing which would mean that a pullback to the 50 DMA at 1591 should not be ruled out...(but we may have to wait until June - as PM's continue the window dressing and the MSCI completes their portfolio "re-balance" on Friday, May 31st.

So are we to expect that this change in pattern suggests a temporary top? Hard to call with Uncle Benny continuing the $85 bil stimulus, but we can confirm that a change in psyche is emerging. The key is whether we test and hold at 1591 or not? (A retreat to that level represents a 4% pullback.) If we fail to hold then a longer term move could take us back to 1535 ish.....(a 7.5% correction). If we rebound - then a continued test of the 1680 level is ahead.

Just a quick note on the eco data.....Consumer conf is direct conflict with retail sales, regional manufacturing and the latest durable goods report....the gov't is claiming that the conf index rose to its highest level in 5 yrs and that all is well with the consumer despite spending cuts, furloughs and the rising costs of OBAMACARE...

"Back-to-back monthly gains suggest that consumer confidence is on the mend and may be regaining the traction it lost due to the fiscal cliff, payroll-tax hike, and sequester,"said Lynn Franco, Director of Economic Indicators at the Conference Board

I'm just sayin'.....the data continues to conflict yet where are investors to go? Yesterday we saw the 10 & 30 yr Treasury yields make the largest move in the last nine months following last week's break above 2% in the 10-YR, - this bodes well for a further move up to the 2.35% level before we hit any resistance. Yesterday's weak 2 yr auction may have investors concerned that diminished demand will lead to more talk of FED tapering. Telecoms and Utilities both under pressure as they are the two biggest yield-based sectors. If rates continue to move higher the you can expect that these groups should continue to underperform.

Overnight in Asia stocks rose again but were off the session highs as they react to the US action yesterday. As the day wore on - more talk of FED policy put pressure on traders and investors. BoJ governor Kuroda delivered a speech calling for "global flexibility" when dealing with the ongoing crisis.....The Nikkei ends near flat, China +0.12%, ASX +0.08% and Hong Kong -1.6%.

In Europe markets under pressure....The EU to ease its hard line on austerity demands for key countries.....France, Spain, and the Netherlands all to be given a "hall pass" on the annual 3% deficit limit. Italy to be freed from intensive fiscal monitoring despite the most recent news of tax cuts.....FTSE - 1.5%, CAC 40 -1.4%, DAX -1.7%, EUROSTOXX -1.40%, SPAIN -0.76% and ITALY -0.72%

Take Good Care
KP

Broiled Lollipop Lamb chops with Risotto Mazzo.....



This is a risotto dish that is prepared with celery, shallots and lemon zest & juice - it has been described as a masterpiece - like a Leonardo di Vinci, or a Michelangelo....you get the picture - right? It is a bouquet of flavors that will tease the palate........proceed with caution........

Lollipop Lamb chops - so easy....season the lamb chops - both sides - with Adobo - you can buy this spice in the Spanish section of your favorite grocer...it is a seasoning that is versatile, and easily used on any meat or poultry.....place on broiler pan, cover with saran wrap and bring to room temp before you broil.....When you do broil - temp is on high.....chops should take about 6 /8 mins per side - you want them to be juicy yet a bit crusty......

Next Risotto Mazzo - (Risotto Bouquet)
Men - This is an easy recipe - but it is a bit laborious as you must stand over the pot and stir...but as long as you have a glass of wine and play some relaxing Italian music, light the candles, dim the lights, set the table - you will have them eating out of your hand.....

In a bowl - combine 1/4 cup of lemon juice, 1/2 cup of heavy cream, 2 + handfuls of grated parmigiana - set aside....

In a separate pot - heat to a boil then reduce to simmer - 2 large cans of vegetable stock - the big cans...like College Inn size....got it?

Next - Dice 3 good size shallots and 3 celery branches into fine pieces and place in a pot with 3 tblspoon of butter and a splash of olive oil - cook - med hi heat - until soft....couple of minutes....Stir in 2 1/4 cups of Arborio rice - this is very important that you use Arborio rice and not Uncle Ben's! Stir it around and coat well. Continue to move it around until it starts to brown a bit....not burn - just brown....now....add one ladle of veggie stock and stir until it is
absorbed by the rice - then continue with - one ladle of veggie stock at a time until the risotto is creamy and tender*.....about 30 mins .....At this point you add the zest of 1 lemon and about 1 teaspoon of rosemary....stir ....introduce the bowl of cream, lemon juice and parmigiana into the rice - stir well...remove from heat...., add s&p and serve immediately.

You can make this dish as a first course or as a main course or as a side dish to a main meat course - as noted above with the Lollipop Lamb chops.

Buon Appetito.