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.
The market closed higher for the week and on Thursday’s shortened pre-holiday session. Volume, an important indicator of institutional sponsorship, was lighter than Wednesday’s levels, again revealing the lack of appetite for accumulating shares from very large and influential institutional investors. Advancers led decliners by nearly a X-to-X ratio on the NYSE and by over…
Tuesday, November 30, 2010 Stock Market Commentary: The euro sliced below its 200 DMA line and its psychologically important level of 1.30 this week as concern spread that their debt woes will spread. The rally which began on the September 1, 2010 follow-through day ended on Tuesday. November 16, 2010 as stocks and commodities plunged in heavy…
Thursday, May 19, 2011
Stock Market Commentary:
Stocks and a host of commodities ended mixed after the latest economic data missed estimates. 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.
Lousy Economic Data Weighs On Stocks:
Investors digested a slew of economic data on Thursday. On the plus side, the Labor Department said weekly jobless claims fell by -29,000 to 409,000 last week but the four-week average is still above 400,000. On the downside, existing homes sales missed estimates at a 5.05 million annual unit rate, down -0.8% in April and tanked -12.9% vs. the same period in 2010. Leading economic indicators fell -0.3% in April following a 0.7% jump in March. The report also missed the Street’s estimates. In other news, the Philly Fed Survey also missed estimates which suggests sluggish economic growth may be on the horizon.
Market Outlook- Rally Under Pressure
From our point of view, the market rally is under serious pressure which suggests caution is paramount at this juncture. Looking forward, the next level of support for the major averages are their respective 50 DMA lines and resistance is their 2011 highs. The rally remains in tact as long as support holds on a closing basis. If you are looking for specific help navigating this market, please contact us for more information.
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