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.” For the past few weeks, we have written about the importance of being defensive especially because the action in the major averages and a slew of leading stocks deteriorated. After the sharp fall, the bulls showed up and are doing their best to defend the longer term 200 DMA lines for the major averages. If that level is “broken” on a closing basis- then we have to expect another leg lower to begin.
Stocks rallied on Monday erasing earlier losses and marked Day 1 of a new rally attempt. Stocks looked passed a lackluster non-manufacturing PMI reading from China and were hopeful that the EU crisis was not deteriorating further. The CRB Commodity Index managed to snap a four day losing streak which also helped stocks rally. The euro, which is a great barometer for “riskon” assets, also rallied from deeply oversold levels which paved the way for a “riskon” day.
Stocks rallied on Tuesday after the latest round of economic data was mixed. European retail sales slid but non-manufacturing PMI improved marginally. Finance ministers from the G7 held an emergency teleconference but failed to come up with any ground breaking solutions. The latest ISM Services Index rose to 53.7 in May from 53.5 in April. Moody’s one of the popular rating agencies, slashed the ratings on several European banks.
Stocks extended their gains on Wednesday after the ECB held rates steady at 1% and optimism spread. The ECB held its key interest rate unchanged at 1% which matched expectations. ECB President Mario Draghi said the central bank will do its best to curb inflation but added that inflation pressures remain subdued. Draghi also said the ECB expects inflation should remain above 2% for the rest of 2012 and then fall to 1-2% in 2013.
Thursday & Friday’s Action- Stocks Slide As Enthusiasm Wanes:
Before Thursday’s open, China lowered their interest rates by 25 basis points to 6.31% to help boost their “sagging economy.” The PBC move was not expected and helped send a slew of risk assets higher. Janet Yellen, the vice chair of the Fed, gave a speech in Boston where she made a case for another round of monetary easing to protect and stimulate the US economy from the impact of the euro zone debt crisis. After the open, Bernanke testified before the Congressional Joint Economic Committee and reiterated his recent stance regarding continued “downside” risks to the economy and capital markets. In European news, Spain has not yet requested assistance from the ECB and has resisted being placed under international supervision. However, Reuters reported that both German and European Union officials are urgently searching for solutions to their onerous debt problems. Stocks sold off in the final hour after the U.S. Fed boosted capital requirements for several of the country’s largest banks. Stocks rallied on Friday as enthusiasm regarding the global economy improved.
STOCK 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…
Friday, March 08, 2013 Stock Market Commentary: The riskon trade is alive and well as the major averages continues racing higher. The last pullback was shallow in size and scope. The S&P 500 pulled back 2.9% after the minutes from the Fed’s last meeting hinted that QE might end sooner than originally expected. The pullback lasted less…
Friday, October 12, 2012 Stock Market Commentary: The major averages fell last week and broke down below their respective 50 DMA lines for the first time since July. So far this is nothing more than a normal pullback after a big run. The S&P 500 is less than -4% below its multi year high of…
Summer Pullback Underway The Dow Jones Industrial Average and S&P 500 fell for a second straight week as selling finally showed up and volatility jumped. The tape remains somewhat split: The Dow Jones Industrial Average is out-performing its peers on a relative basis. The Nasdaq Composite and S&P 500 are a little weaker and closed…
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.
Friday, May 4, 2012 Stock Market Commentary: Stocks and a slew of other “risk assets” fell in the first week of May after the latest round of economic and earnings data failed to impress investors and half of Europe has fallen back into a double dip recession. As earnings and economic data continues to be…
