Daily Market Commentary

Stocks Bounce Off Support

Monday, June 27, 2011
Stock Market Commentary:

Stocks bounced off support (200 DMA line) on Monday as investors continue to wait for a near term solution for Greece. This will be a busy week for investors as a slew of economic data will be released (shown below), QE 2 and the second quarter will end. The major averages remain trapped in the middle of their multi-week sideways trading range with support near the 200DMA and resistance near the recent chart lows (SPX 1294) and then the 50DMA.

Monday: Greece Austerity Vote Nears & U.S. Consumer Spending Unchanged

On Monday, stocks bounced as investors waited for the Greek government to vote on the latest round of austerity measures. U.S. consumer spending was unchanged in May for the first time in almost a year. The Commerce Department said consumer spending was flat, following 10 straight monthly gains and followed a downwardly revised +0.3% gain in April. The unchanged reading was slightly lower than the Street’s +0.1% forecast. After adjusting the data for inflation, spending slid -0.1% in May which does not bode well for the ongoing economic recovery.
Market Outlook- Market In A Correction:
The market is back in a correction after another failed follow-through day on Tuesday, June 21, 2011. Now that we are back in a correction, defense remains the best offense. The next level of support for the major averages is their respective 200 DMA lines and then their March lows. The next level of resistance for the major averages is their respective 50 DMA lines. Trade accordingly.
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. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. Two days later, on Thursday, June 23, 2011, our outlook changed to “Market In A Correction” after the market sold off hard on renewed economic woes. If you are looking for specific help navigating this market, please contact us for more information.

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MONDAY: Consumer Spending, Earnings from Nike
TUESDAY: S&P Case-Shiller home price index, consumer confidence, 5-yr note auction, IMF board to select new chief
WEDNESDAY: Weekly mortgage apps, pending home sales index, oil inventories, 7-yr note auction, farm prices, Dell analyst meeting, Fed meeting on card fees; Earnings from Family Dollar, General Mills, KB Home, Monsanto
THURSDAY: Q2 Ends, Weekly jobless claims, Fed’s Bullard speaks, Chicago PMI, End of QE2, Marathon Oil split takes place
FRIDAY: Q3 Begins, Consumer sentiment, ISM mfg index, construction spending, Biden’s deadline for deficit plan, HP launches TouchPad, auto sales
Source: CNBC.com

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