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.” Then in early June the bulls showed up and defend the 200 DMA lines for the major averages. On Friday, the bulls managed send the benchmark S&P 500 index above the neckline of its bullish inverse head and shoulders pattern (shown above). The next level of resistance is the 50 DMA line and then 2012’s highs.
Monday-Wednesday’s Action- Bad News is “Good” News:
Stocks opened higher but closed lower on Monday as enthusiasm waned regarding Spain’s $125 billion bailout. The best headline I came across was one saying, “Spain Got Tarped.” The details of the plan were not ideal and showed EU leaders just throwing more debt at a debt crisis. After the initial and expected at the open on Monday, stocks fell hard and closed near their lows of the day as investors focused on the upcoming elections in Greece and Italy’s onerous debt burden.
Stocks ended with modest gains on Tuesday but volume, a critical component of institutional activity, was lighter than Monday, as investors looked passed Spain’s woes and focused on hopes that the recent spate of “bad” news will force the Fed’s hand into another round of QE when they meet next week. Cyprus, the third smallest country in the eurozone, sports a tiny population of under 1 million, and its economy only accounts for +0.2% of eurozone GDP asked for a bailout. Yields on Spanish and Italian debt jumped on the news.
The major averages ended lower on Wednesday as sellers showed up and sent stocks lower before the close. The economic data in the U.S. was less than stellar. Retail sales fell -0.2% in May which exceeded the Street’s estimate for a decline of -0.1%. Elsewhere, producer prices missed estimates, falling -1% in May while core prices met estimates, rising +0.2%.
Thursday & Friday’s Action- Fed, ECB, Someone Save Us:
Stocks enjoyed nice gains on Thursday after global Central Banks stepped up and said they are willing to act if the Greek elections spook markets. The Labor Department said weekly jobless claims to rose to 386,000 from 380,000 which topped the Street’s estimate for 375,000. Overall consumer prices slid by -0.3%in May which topped the Street’s estimate for a decline of –0.2%. Core prices rose by +0.2% which topped the Street’s estimate for a gain of +0.1%. The government said, for the first quarter the current deficit data totaled $137.3billion, which is greater than the $130.9 billion deficit that had been anticipated. Again, stocks rallied on hopes that “bad” data will force the Fed’s (and other central bank’s) hand. Stocks rallied on Friday after the latest round of economic data was released. The data suggested that the US economy is “slowing” which investors are hoping will force the Fed’s hand at their next meeting later this month.
Market Outlook- In A Correction
From our point of view, the market is back in a correction now that all the major averages are back below their respective 50 DMA lines. Looking forward, we want to see a powerful accumulation day to confirm the latest rally attempt. Technically, the 200 DMA line and June’s lows are the next level of support while the 50 DMA line is the next level of resistance for the major averages. As always, keep your losses small and never argue with the tape.If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
Rally Continues On Wall Street Stocks continued to rally last week, helping the small cap Russell 2000 to jump to fresh record highs. On Christmas day, China’s central bank eased lending requirements which was viewed as another (bullish) step to stimulate their economy. The big news last week came from the natural gas market, not…
Stocks End Week Mixed As Trade Woes Divide Wall Street The split tape I mentioned over the last few weeks continues as the Nasdaq and Small-Cap Russell 2000 hit fresh record highs while the S&P 500 and Dow Jones Industrial Average lag. The reason is simple: there remains a lot of uncertainty with respect to…
Market Action- Rally Under Pressure; Week 28
It was encouraging to see the bulls show up and defend the major averages’ respective 50 DMA lines in November, January, late February, and early March. From our point of view, the market remains in rally-mode until those levels are breached. The tech-heavy Nasdaq composite and small-cap Russell 2000 indexes continue to lead evidenced by their shallow correction and strong recovery. If you are looking for specific high ranked ideas, please contact us for more information.
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Stocks End Month Higher; Week Lower The Dow Jones Industrial Average, the benchmark S&P 500, small-cap Russell 2000, and Nasdaq composite all fell last week but rallied for the month. The latest reading on U.S. Q1 GDP fell 0.7%, beating the government’s estimate for a decline of 0.8%. Economists now believe that Q2 GDP will grow around 2%…
Thursday, December 8, 2011 Stock Market Commentary: Risk assets were fell on Thursday as investors across the globe digested a slew of data, two important central bank meetings, and are still waiting for another much anticipated EU Summit this weekend. From our point of view, the market confirmed its latest rally attempt on Wednesday, November 30, 2011…
Stocks Fall As Earnings Season Begins Stocks fell hard last week as the market digested the latest round of mixed economic and earnings data. Investors continue to wait for a new catalyst to emerge to help the benchmark S&P 500 break out of its current 5-month trading range. Since December 2014, the S&P 500 has been trading between 2,119 (resistance) and…
