Southridge Capital Comments on Payroll Report:

June Employment Report: 100K Jobs ex-Census, 9.5% Unemployment Rate 9.5%
The weak reports will add to growing concerns that the economic recovery is slowing.

The jobless rate was 9.5 percent last month, down from 9.7 percent in May, a surprising decrease that came as hundreds of thousands of workers dropped out of the labor force. Private employers added just83,000 jobs in June

The Birth/Death adjustment added 147,000 jobs to the number. The B/D model has now added over 550,000 jobs that this 'adjustment' has added this quarter .

Employers cut hours, average pay dropped, and more people gave up looking for work

Total nonfarm employment actually dropped 125,000 -- the largest decline since October -- as the government laid off 225,000 temporary census workers.

Southridge Capital - Robert Colby - Chief Market Technician - Comments on Close of Second Quarter

Summary: oversold with some positive divergences…there is still hope for an oversold bounce.

S&P 500 Composite (SPX) broke below 8-month lows on 6/30/10, thereby clearing out some protective sell stops below the lows.

Sentiment is more bearish.

Advisory Service Sentiment shows an decrease in the Bull/Bear ratio, which fell to1.23, down from 1.32 the previous week. The ratio has fallen substantially from its peak at 3.36 set on 1/13/10, which was the highest bullish sentiment in 6 years.

SPX price momentum oscillators, such as RSI (14), MACD, Directional Movement, and Stochastics, are more deeply oversold but not quite as oversold as they were a few weeks ago, thereby showing bullish divergence.

The Dow-Jones Industrial Average closed below 7-month lows. The Dow-Jones Transportation Average closed below 4-month lows. Some will interpret this as a Dow Theory Bear signal, but I interpret it as a non-confirmation.

The Dow-Jones Utility Average held above June lows.

The Cumulative Daily Advance-Decline Line is still holding above its early June low.

Both NYSE and NASDAQ Bullish Percent Indexes are holding above early June lows.

Consumer Discretionary Stock Sector absolute price fell below 4-month lows on 6/30/10.

Consumer Staples Stock Sector absolute price fell below 8-month lows on 6/30/10.

Industrial (XLI) Stock Sector absolute price fell below 4-month lows on 6/29/10.

Technology Stock Sector Relative Strength Ratio (XLK/SPY) crossed below both 50- and 200-day SMAs on 6/30/10 and is now neutral. Absolute price fell below 8-month lows on 6/30/10.

Utilities Stock Sector Relative Strength Ratio (XLU/SPY) rose above 5-month highs on 6/30/10. The XLU/SPY Ratio’s 50-day SMA is still below the 200-day SMA, however, so the XLU/SPY remains neutral. Absolute price of XLU fell below 3-week lows on 6/30/10.

Health Care Stock Sector Relative Strength Ratio (XLV/SPY) rose above the highs of the previous 3 months on 6/30/10. The XLV/SPY Ratio’s 50-day SMA is still below the 200-day SMA, however, so the XLV/SPY remains neutral. Absolute price of XLV fell below 4-week lows on 6/30/10 and remains bearish because price is below both SMAs and the 50 is below the 200 SMA.

Financial Stock Sector absolute price fell below 3-week lows on 6/30/10.

Energy Stock Sector absolute price fell below 10-month lows on 6/30/10 and remains bearishly below 50- and 200-day SMAs.

NASDAQ Composite absolute price fell below 7-month lows on 6/30/10.

The Small Cap Russell 2000 Index absolute price tested its May-June lows and remains neutral.

Crude Oil broke down below support at 75.17 on 6/30/10, turning the short-term trend bearish.

U.S. Treasury Bond price rose further above 14-month highs on 6/30/10, again confirming a major uptrend.

U.S. Treasury Inflation Protected / U.S. Treasury 7-10 Year Relative Strength Ratio (TIP/IEF) fell further below 8-month lows on 6/30/10 and is RELATIVELY bearish. This implies that investors are choosing less inflation protection.

Southridge Capital | Bob Colby CMT Comments About The Market

Summary: clearing out protective sell stops below the lows.

S&P 500 Composite (SPX) broke below 7-month lows on a both an intraday and closing price basis, thereby clearing out some protective sell stops below the lows.

SPX price momentum oscillators, such as RSI (14), MACD, and Stochastics, are more deeply oversold. But they are not quite as oversold as they were a few weeks ago. Thus, they show bullish divergences.

The Dow-Jones Industrial, Transportation, and Utility Averages tested and held previous 2010 lows.

The Cumulative Daily Advance-Decline Line also held above its early June low.

VIX Fear Index jumped up to 35.39 on 6/29/10, up from 22.87 on 6/21/10. A high and strongly rising VIX suggests increasing bearish sentiment.

Consumer Discretionary Stock Sector absolute price crossed below its 200-day SMA and broke support at 30.34 on 6/29/10.

Industrial Stock Sector absolute price whipsawed back below its rising 200-day SMA again on 6/28/10 and remains neutral.

Technology Stock Sector absolute price fell further below its rising 200-day SMA on 6/29/10.

Utilities Stock Sector Relative Strength Ratio (XLU/SPY) rose above the highs of the previous 4 months

Southridge Capital Comments On New Consumer Confidence Index

The Conference Board, a private research group based in New York, said Tuesday that its Consumer Confidence Index dropped almost 10 points to 52.9, down from the revised 62.7 in May. Economists surveyed by Thomson Reuters had been expecting 62.8 for June. June's reading marked the biggest drop since February, when the index fell 10 points. The index had risen for three straight months since then.

Both components of the index — one that measures how consumers feel now about the economy, the other that assesses their outlook over the next six months — dropped. The Present Situation Index decreased to 25.5 in June from 29.8 in May. The Expectations Index declined to 71.2 from 84.6.

Southridge Capital on Retail

Retail took the brunt of the selling the last 5 days (in Red below) falling 2 or 3 times as far as the SPX in 5 days. There may be a bounce, but Southridge believes that it could continue as we approach EPS and confession time for companies. Charts below show that the XRT has broken through major LT moving averages.

Southridge Capital Notes Unemployment Benefits Claims Fell

Southridge Capital took note reading that unemployment benefits initial claims fell by 24,000 to a seasonally adjusted 456,000, according to the Labor Department. Southridge Capital is convinced small business will be vital in the recovery; hence we looked at beer sales in the United States and see how the recession affected the Alcohol Industry.

According to The Brewers Association small and independent craft brewers saw sales dollars increase 10.3 percent and volume increase 7.2 percent in 2009 vs. 2008. This bubbly news is fascinating because beer sales over all decreased in the USA 2.2% in 2009. Imports also fell more than 9% in 2009.

Equally interesting is that apparently during 2009, the number of U.S. craft brewers making beer increased from 1,485 to 1,542. According to Wikipedia, Beer accounts for 85% of the volume of alcoholic beverages sold in the United States each year.

By way of reference Craft Brewers are defined as those producing less than 2 million barrels. No surprise that one way that Americans were able to deal with the recession was to have a cold one at the new brewery “around the corner.”

Southridge Capital Cheered Auto Industry News

Southridge Capital cheered the great news from the Auto Industry last week. The first was General Motors repayment of the Federal Government loans of $5.8 billion ahead of schedule. Not only did the loans get repaid early, but the Federal Government made money.

Secondly, sticking with the auto industry, Chrysler reported an operating profit of $143 million, with sales increasing 3%, and market share increasing a full percentage point from 8.1% to 9.1%. So as mentioned in an early blog we felt (and still feel) the Auto Industry is helping us out of the recession.

Southridge Capital

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