Daily Market Commentary

Market In A Correction; 50 DMA Line Broken

Monday, May 23, 2011
Stock Market Commentary:

Stocks and a host of commodities were smacked on Monday after Standard & Poor’s downgraded Italy’s credit rating to negative and China’s PMI slowed. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.

Trouble In Europe Grows As Global Economic Growth Slows:

Over the weekend, Standard & Poor’s rating agency cut Italy’s credit rating to negative which sent the euro and a slew of commodities plunging. Italy, one of the “PIIGS” is the latest shoe to fall in the euro-zone. The primary reason why the euro is getting smacked is because many people are questioning the single currency’s future. In other news, economic data from China was weaker-than-expected which led many to question the ongoing global recovery theme. China has been a primary catalyst for the 2.5 year global recovery. Therefore, any material slow-down in China may derail the ongoing recovery which will adversely affect demand.

Market Outlook- Market In A Correction

From our point of view, the market is in a correction as a new downtrend has formed and the 50 DMA line is broken for many of the major averages.  Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. Looking forward, the next level of support is the 9-month upward trendline and the next level of resistance is their 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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