S&P 500 Breaks Below Support of its Large Triangle

Byinfo@50park.com

SPXSTOCK MARKET COMMENTARY:
FRIDAY, JUNE 21, 2013

The major averages sliced below support on Thursday after the Fed opened to the door to taper QE sooner than initially expected. The benchmark S&P 500 is down in 4 of the past 5 weeks which suggests the bears are now in control of this market. For most of this year the 50 DMA line and the upward trendline (from November) served as formidable support. Therefore, until the market trades and closes above its upward trendline we have to believe that support should now become resistance.  

MONDAY-WEDNESDAY’S ACTION: Fed Disappoints

Stock markets across the globe rallied on Monday after a series of stronger-than-expected economic data was announced. In Europe, Germany’s Bundesbank believes Europe’s largest economy will grow strongly in the second quarter which bodes well for the global economy. In the U.S., the Empire Manufacturing Index rose to 7.84 in June easily beating the Street’s estimate for unchanged and May’s reading of -1.43.   The National Association of Home Builders said its monthly sentiment index of home builders jumped to 52 in June from 44 in May. A reading over 50 signals expansion, it was the first time this number topped 50 since April 2006 and it was the highest level in 7 years.

Before Tuesday’s open, investors digested a mixed round of economic data. The Commerce Department said housing starts rose 6.8% in May to a seasonally adjusted annual rate of 914k. May’s reading missed the Street’s estimate for a gain of 950k but was better than April’s reading which shows a subtle improvement for the housing market. Meanwhile, the consumer price index edged up 0.1% in May which barely missed the Street’s estimate for a gain of 0.2%.

Stocks fell on Wednesday after the much anticipated two-day Fed meeting concluded. As expected the Fed did not taper at this meeting but he left the door open for potential tapering before the end of the year. Stocks sold off as yields soared because many investors believe that Bernanke will begin tapering sooner than initially expected.

THURSDAY & FRIDAY’S ACTION: Stocks Break Support In Heavy Volume

Stocks were smacked on Thursday sending the major averages below support (50 DMA line, 6-month upward trendline, and April’s high). Overnight, factory activity in China slid to a 9-month low which hurt global demand. The economic data in the US was mostly mixed. The National Association of Realtors said existing home sales rose +4.2% in May to an annual rate of 5.18 million units which was the highest level in 3-1/2 years. Factory activity in the mid-Atlantic region rose to 12.5 in June which topped the Street’s estimate for -2 and easily beat May’s reading of -5.2.  The big news of the day was the heavy selling across nearly every asset class. Stocks, Gold, Bonds, and a slew of other commodities, were smacked as investors now believe tapering may begin as soon as September. Stocks were quiet on Friday as investors tried to make sense out of this shellacking.

MARKET OUTLOOK: Support Breaks

The narrative has clearly shifted since the May 22, 2013 high (when Bernanke and the Fed hinted that they may taper QE sooner than initially expected).  Now that the market is pulling back we shall be patient and let this pullback run its course. Our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

BECOME A CLIENT TODAY

VISIT:
SARHANCAPITAL.COM
OR
FINDLEADINGSTOCKS.COM

Similar Posts

  • Debt, Debt, & More Debt!

    Byinfo@50park.com

    Market Outlook- Uptrend Under Pressure:
    The last week of June’s strong action suggests the market is back in a confirmed rally. As our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the current rally is under pressure as investors patiently await earnings season. Until then, the market deserves the bullish benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Want To Follow Trends?
    Learn How We Can Help You!

  • Day 3: The Selling Continues

    Byinfo@50park.com

    The technical action in the major averages has deteriorated significantly. Not all of the major averages managed to rally above their recent chart highs, and all have now sliced back below their respective 200-day moving average (DMA) lines. It is also worrisome to see the number of distribution days pile up in recent weeks which puts pressure on the current five-week rally. Whenever a market rally becomes under pressure (as it is now), it is usually wise to err on the side of caution and adopt a strong defensive stance until the bulls regain control. Trade accordingly.

  • Week In Review: Stocks Fall As Earnings Season Begins

    Byinfo@50park.com

    Stocks Fall As Earnings Season Begins: 07.11.14 The Long-Awaited Pullback Has Arrived. Will It Stay? Stocks pulled back last week as Q2 earnings season officially began. So far this appears to be another normal and healthy shallow pullback in both size (% decline) and scope (short duration).  Remember, shallow pullbacks are healthy as they give the…

  • Summer Begins; New Rally Confirmed!

    Byinfo@50park.com

    Market Outlook- Market In A Correction:
    The market is back in a correction now that all the major averages closed below their respective 50 DMA lines and important upward trendlines. Since the beginning of May, we have urged our clients and readers to be extremely cautious as the major averages and a host of commodities began selling off. Looking forward, the next level of resistance for the major averages is their recent lows (i.e. 1294 in the S&P 500) and then their respective 50 DMA lines. The next level of support is their longer term 200 DMA lines and then their March 2011 lows.
    For those of you that are interested, the S&P 500 hit a new 2011 high on May 2, 2011. Two days later, on Wednesday, May 4, 2011, we turned cautious and said “The Rally Was Under Pressure” (read here). Then on Monday, 5.23.11, we changed our outlook to “Market In A Correction” (read here). On Monday, June 6, 2011 we pointed out that the S&P 500 violated its 9-month upward trendline (read here) and reiterated our cautious stance. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Want To Follow Trends?
    Learn How We Can Help You!

  • Stocks Slide As Global Recovery Slows

    Byinfo@50park.com

    The technical action in the major averages has deteriorated significantly. Not all of the major averages managed to rally above their recent chart highs, and all have now sliced back below their respective 200-day moving average (DMA) lines. It is also worrisome to see the number of distribution days pile up in recent weeks which puts pressure on the current five-week rally. Whenever a market rally becomes under pressure (as it is now), it is usually wise to err on the side of caution and adopt a strong defensive stance until the bulls regain control. Trade accordingly.