Markets Fall As Dollar Rallies

Wednesday, May 11, 2011
Stock Market Commentary:

Stocks and a host of commodities fell as the bears showed up after a three day hiatus and sent a slew of global markets lower in heavy trade. Oil, silver, gold, and a host of other closely followed commodities fell after a brief rebound from last week’s week-long “Flash Crash.” From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.

Inflation Rises Overseas While Trade Deficit Widens In U.S.

On Wednesday, China said consumer prices jumped +5.3% in April (from the same period in 2010) and lending exceeded analysts’ estimates. The news will likely prompt China’s central bank to raise rates (i.e. tighten monetary policy) to curb inflation and cool their red-hot economy. Inflation in Germany, Europe’s largest economy, also topped estimates and rose by +2.7%. Global markets fell as fear spread that Chinese demand will slow.
In other news, the U.S. trade deficit widened more than forecast in March due to surging commodity prices which eclipsed record exports.  The Commerce Department said the trade deficit rose +6% to $48.2 billion, the largest since June 2010, from $45.4 billion in February. 

Market Outlook- Rally Under Pressure

From our point of view, the market rally is under pressure which suggests caution is paramount at this stage.  Looking forward, the next level of support for the major averages are their respective 50 DMA lines and resistance is their 2011 highs. The rally remains in tact as long as support holds. If you are looking for specific help navigating this market, please contact us for more information.

Want Better Results?

You Need Better Ideas!

We Know Markets!

Learn How We Can Help You!

Similar Posts

  • Stocks Bounce Back As Dollar Falls

    Heretofore, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong but the market appears to be placing an interim top here as the major averages consolidate their recent move. The S&P 500 sliced below its two month upward trendline (shown above) which is not a healthy sign. The next level of support for the major averages is their September highs, then their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. We have enjoyed large gains since the September 1st FTD and for the first time, the tape is getting sloppy. Trade accordingly.

  • Week In Review; 50 DMA Line Is Resistance

    The bears returned from a three day hiatus on Thursday afternoon and erased Wednesday’s gains, sending the DJIA and the Nasdaq composite back below their respective 50 DMA lines. In addition, volume was heavier than the recent advance which was not a healthy sign. The highly influential financial group continues to lag its peers, evidenced by the lackluster action in several key names. Most of the major financial firms are now trading below both their respective 50 DMA and 200 DMA lines, which is another ominous sign. Stocks got smacked on Friday after news spread that French President Nicolas Sarkozy threatened to leave the EU if the trillion dollar bailout was not passed. Again, volume rose as the major averages fell. What does all this mean for investors? Simple, the market is in a correction which reiterates the importance of adopting a defense stance until a new rally is confirmed. Trade accordingly.

  • Global Markets Plunge As Risk Off Trade Accelerates

    Wednesday, December 14, 2011 Stock Market Commentary: Risk assets continued to fall on Wednesday after fear spread that the global economy is slowing and there might be more trouble in Europe. From our point of view, the market is back in a correction as the latest follow-through day (FTD) failed after the benchmark S&P 500…

  • Global Central Banks Help The Euro

    Market Outlook- Rally Under Pressure:
    The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when several distribution days emerge or August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.