Stocks and a slew of other “riskon” assets bounced from deeply oversold levels as hope spread that another round of global monetary easing will curb the economic slowdown across the globe. In early May, all the major averages sliced below their respective 50 DMA lines which prompted us to label this market “in a correction.” Then in early June the bulls showed up and defend the 200 DMA lines for the major averages. On Friday, the bulls managed send the benchmark S&P 500 index above the neckline of its bullish inverse head and shoulders pattern (shown above). The next level of resistance is the 50 DMA line and then 2012’s highs.
Monday-Wednesday’s Action- Bad News is “Good” News:
Stocks opened higher but closed lower on Monday as enthusiasm waned regarding Spain’s $125 billion bailout. The best headline I came across was one saying, “Spain Got Tarped.” The details of the plan were not ideal and showed EU leaders just throwing more debt at a debt crisis. After the initial and expected at the open on Monday, stocks fell hard and closed near their lows of the day as investors focused on the upcoming elections in Greece and Italy’s onerous debt burden.
Stocks ended with modest gains on Tuesday but volume, a critical component of institutional activity, was lighter than Monday, as investors looked passed Spain’s woes and focused on hopes that the recent spate of “bad” news will force the Fed’s hand into another round of QE when they meet next week. Cyprus, the third smallest country in the eurozone, sports a tiny population of under 1 million, and its economy only accounts for +0.2% of eurozone GDP asked for a bailout. Yields on Spanish and Italian debt jumped on the news.
The major averages ended lower on Wednesday as sellers showed up and sent stocks lower before the close. The economic data in the U.S. was less than stellar. Retail sales fell -0.2% in May which exceeded the Street’s estimate for a decline of -0.1%. Elsewhere, producer prices missed estimates, falling -1% in May while core prices met estimates, rising +0.2%.
Thursday & Friday’s Action- Fed, ECB, Someone Save Us:
Stocks enjoyed nice gains on Thursday after global Central Banks stepped up and said they are willing to act if the Greek elections spook markets. The Labor Department said weekly jobless claims to rose to 386,000 from 380,000 which topped the Street’s estimate for 375,000. Overall consumer prices slid by -0.3%in May which topped the Street’s estimate for a decline of –0.2%. Core prices rose by +0.2% which topped the Street’s estimate for a gain of +0.1%. The government said, for the first quarter the current deficit data totaled $137.3billion, which is greater than the $130.9 billion deficit that had been anticipated. Again, stocks rallied on hopes that “bad” data will force the Fed’s (and other central bank’s) hand. Stocks rallied on Friday after the latest round of economic data was released. The data suggested that the US economy is “slowing” which investors are hoping will force the Fed’s hand at their next meeting later this month.
Market Outlook- In A Correction
From our point of view, the market is back in a correction now that all the major averages are back below their respective 50 DMA lines. Looking forward, we want to see a powerful accumulation day to confirm the latest rally attempt. Technically, the 200 DMA line and June’s lows are the next level of support while the 50 DMA line is the next level of resistance for the major averages. As always, keep your losses small and never argue with the tape.If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
Stocks Fell After Hitting New Highs Last Week After all was said and done, underneath the surface, it wasn’t a pretty week on Wall Street. On Monday, the benchmark S&P 500 hit a new high for the year, then turned lower after several key areas of the market began to fall out of bed. Social media…
STOCK MARKET COMMENTARY: Friday, October 12, 2013 The market positively reversed last week (opened lower and closed higher) after investors believed that a deal would get done in DC. So far this appears to be just another shallow pullback in size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year…
Stocks Snap A 7-Week Win Streak Stocks snapped a very strong 7-week win streak after overseas jitters coupled with imploding oil prices hurt confidence. Over the past month, we have written extensively about how this market was getting “extended/over-bought” and way overdue for a pullback of some sort. That is exactly what is happening right now….
Looking at the recent action in the market, the Dow Jones Industrial Average and benchmark S&P 500 index enjoyed their best close of the year as they continue flirting with important resistance levels (10,500 and 1,115 respectively.). The major averages continue acting well as they remain perched just below resistance (their respective 2009 highs) and above their respective 50-day moving average lines. Both these factors are considered healthy and bodes well for this 8-month (41-week) rally. It was also encouraging to see the Nasdaq close above 2,200 which has served as formidable resistance over the past few months. A slew of economic data is slated to be released this week and, as always, it will be very important to see how the market reacts to that news.
Monday, March 14, 2011 Stock Market Commentary: Japan’s benchmark Nikkei index plunged over -6% on Monday as the country struggles to contain the effects of Friday’s devastating earthquake. The 28-week rally, which began on the September 1, 2010 follow-through day (FTD), ended on Thursday March 10, 2011 when all the major U.S. averages plunged below their respective…
Stocks End Mixed On Trump’s 5th Week In Office Stocks ended mixed to mostly higher on Trump’s 5th week in office. The relentless rally, coupled with the inability for stocks to fall in a meaningful fashion, illustrates how strong the bulls are right now. The more we scan the market and look at leading stocks,…
