Markets Smacked As Global Economy Slows

Friday, June 03, 2011
Stock Market Commentary:

Stepping back, stocks and a host of commodities were smacked since the beginning of May which is eerily similar to the same period last year. The “big” news this week that sent stocks lower was a major slow down in the global recovery. All the major averages closed below their important 50 DMA lines on Wednesday and fell back into the multi month downward trendlines.  This lackluster action suggests more sluggish action lies ahead. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market is back in a correction as the major averages are now flirting with their multi-month upward trendlines.

Monday-Wednesday’s Action- Stocks Slammed As Global Economy Slows:

On Monday, U.S. markets were closed in observance of Memorial Day but other markets across the world were open. The “big” news that helped lift a slew of so-called “risk-assets” (i.e. stocks and commodities) occurred when European officials agreed to another Greek bailout. This sent the euro, and equity futures, surging before Tuesday’s open. In other news, economic data from Asia, Europe, and Canada did not disappoint. Inflation slowed in much of Europe while German unemployment fell, both healthy events for the troubled euro zone. However, not all the news was positive. Denmark’s economy entered a recession after GDP fell -0.5% in Q1. Denmark has now joined Portugal as the only other European nation to be in a recession.  Elsewhere, Canada’s GDP expanded at a 3.9% annualized rate in the first quarter which was nearly double the US’s 1.8% rate but fell short of the 4% expected on the Street. In other news, the U.S. housing market officially is in a double-dip recession as home prices fell another -4.2% in Q1 after falling –3.6% in Q4 2010.
Tuesday’s entire positive move was negated on Wednesday as manufacturing growth slowed from all corners of the globe in May. This added to concerns that the global recovery may be slowing. China and Europe’s purchasing managers’ index showed the slowest rate of growth in nine and seven months, respectively. U.S. factory growth was anemic, falling to the lowest level in one year while manufacturing growth slowed to a virtual standstill in Russia, Poland, and Hungary. Moody’s rating agency slashed Greece’s credit rating further into junk territory on Wednesday which led many to question the healthy of the euro.
Before Wednesday’s open, ADP, the U.S.’ largest private payrolls company, said US employers added fewer jobs than expected in May. The report showed payrolls increasing by +38,000 which was the smallest increase since September 2010 and much lower than the Street’s estimate for an increase of +175,000. Some of the factors that are threatening the global recovery are: rising oil prices, aftermath of Japan’s earthquake, Europe’s ongoing debt crisis, and the age of the recovery (growth tends to be strongest in the early stages of a recovery before leveling out as the recovery losses steam).

Thursday & Friday’s Action – Economic Data Is Weak:

Before Thursday’s open, the Labor Department said weekly jobless claims fell by -6,000 to 422,000 last week. A separate report showed productivity of U.S. workers slowed in the first quarter as labor costs rose. Productivity rose at a +1.8% annual rate after a +2.9% percent gain in the fourth quarter of 2010. After Thursday’s open, factor orders fell by -1.2% in April which missed estimates and was lower than March’s reading of +3.8%. In other news, Moody’s rating agency put a slew of bank stocks on “notice” and will begin investigating their credit ratings. Elsewhere, a slew of high profile retailers reported weaker than expected same store sales. Before Friday’s open, the Labor Department said, U.S. employers added +54,000 new jobs in May which has a huge “miss” as most economists expected a number north of 100,000.

Market Outlook- Market In A Correction

From our point of view, the market is back in a correction now that all the major averages closed below their respective 50 DMA lines and downward trendlines. Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. The next level of resistance is their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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Upward Trendline Under Attack!

Thursday, June 02, 2011
Stock Market Commentary:

Stocks and a host of commodities ended mixed after the latest round of economic data was released. All the major averages closed below their important 50 DMA lines on Wednesday and fell back into the multi month downward trendlines.  This lackluster action suggests more sluggish action lies ahead. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market is back in a correction as the major averages are now flirting with their multi-month upward trendlines.

Jobless Claims, Same-Store Sales, and Factory Orders Fall, Productivity Edges Higher:

Before Thursday’s open, the Labor Department said weekly jobless claims fell by -6,000 to 422,000 last week. A separate report showed productivity of U.S. workers slowed in the first quarter as labor costs rose. Productivity rose at a +1.8% annual rate after a +2.9% percent gain in the fourth quarter of 2010. After Thursday’s open, factor orders fell by -1.2% in April which missed estimates and was lower than March’s reading of +3.8%. In other news, Moody’s rating agency put a slew of bank stocks on “notice” and will begin investigating their credit ratings. Elsewhere, a slew of high profile retailers reported weaker than expected same store sales.

Market Outlook- Market In A Correction

From our point of view, the market is back in a correction now that all the major averages closed below their respective 50 DMA lines and downward trendlines. Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. The next level of resistance is their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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Markets Tank As Global Economy Slows

Wednesday, June 01, 2011
Stock Market Commentary:

Stocks and a host of commodities were smacked on Wednesday after manufacturing data slowed markedly across the globe, Greece’s debt rating was cut even further into junk status, and jobs data disappointed in the U.S. Stocks gave back Tuesday’s gains and fell back into the multi month downtrend which suggests more sluggish action lies ahead. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market is back in a correction as the major averages are now flirting with their multi-month upward trendlines.

Global Manufacturing Slows, Greek Debt Slashed, & Dismal Jobs Report In the U.S.

Manufacturing growth slowed from all corners of the globe in May which added to concerns that the global recovery may be slowing. China and Europe’s purchasing managers’ index showed the slowest rate of growth in nine and seven months, respectively. U.S. factory growth was anemic, falling to the lowest level in one year while manufacturing growth slowed to a virtual standstill in Russia, Poland, and Hungary. Moody’s rating agency slashed Greece’s credit rating further into junk territory on Wednesday which led many to question the healthy of the euro.
In other news, ADP, the U.S.’s largest private payrolls company said US employers added fewer jobs than expected in May. The report showed payrolls increasing by +38,000 which was the smallest increase since September 2010 and much lower than the Street’s estimate for an increase of +175,000. Some of the factors that are threatening the global recovery are: rising oil prices, aftermath of Japan’s earthquake, Europe’s ongoing debt crisis, and the age of the recovery (growth tends to be strongest in the early stages of a recovery before leveling out as the recovery losses steam).

Market Outlook- Market In A Correction

From our point of view, the market is back in a correction now that all the major averages closed below their respective 50 DMA lines and downward trendlines. Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. The next level of resistance is their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.


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Downtrend Is Broken!

Tuesday, May 31, 2011
Stock Market Commentary:

Stocks and a host of commodities rallied as traders returned from a long holiday weekend in the U.S. Other capital markets rallied on Monday after Europe made progress on talks for another Greek bailout. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market is back in a confirmed rally now that support (multi-month upward trendline and 50 DMA line) was defended in May.

Greek Bailout & Economic Data Lifts Futures

On Monday, U.S. markets were closed in observance of Memorial Day but other markets across the world were open. The “big” news that helped lift a slew of so-called “risk-assets” (i.e. stocks and commodities) occurred when European officials agreed to another Greek bailout. This sent the euro, and equity futures, surging before Tuesday’s open. In other news, economic data from Asia, Europe, and Canada did not disappoint. Inflation slowed in much of Europe while German unemployment fell, both healthy events for the troubled euro zone. However, not all the news was positive. Denmark’s economy entered a recession after GDP fell -0.5% in Q1. Denmark has now joined Portugal as the only other European nation to be in a recession.  Elsewhere, Canada’s GDP expanded at a 3.9% annualized rate in the first quarter which was nearly double the US’s 1.8% rate but fell short of the 4% expected on the Street. In other news, the U.S. housing market officially is in a double-dip recession as home prices fell another -4.2% in Q1 after falling –3.6% in Q4 2010.

Market Outlook- Market In A Confirmed Rally

From our point of view, the market is back in a confirmed rally now that all the major averages are back above their respective 50 DMA lines and downward trendlines. Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. However, the fact that the pullback was shallow and the market found support at its 50 DMA line in late May, suggests higher, not lower, prices lie ahead.  The next level of resistance is the 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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A Clear Downtrend Has Formed

Friday, May 27, 2011
Stock Market Commentary:

Stocks and a host of commodities ended mixed this week after bouncing from oversold levels. 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.

Monday-Wednesday’s Action- Stocks Fall

Over the weekend, Standard & Poor’s rating agency cut Italy’s credit rating to negative which sent the euro and a slew of commodities plunging. Italy, one of the “PIIGS” is the latest shoe to drop in the euro zone. In other news, economic data from China was weaker-than-expected which led many to question the ongoing global recovery. China has been a primary catalyst for the 2.5 year global recovery. Therefore, any slow-down in China may derail the ongoing recovery which will adversely affect demand for so-called risk assets.
Before Tuesday’s open, business confidence in Germany was unchanged in May which topped expectations for a negative reading. Germany is Europe’s largest and strongest economy and is largely the binding force for the entire Euro. Therefore, any stronger than expected economic data is typically well received as investors across the globe are keeping a close eye on the entire continent. In other news, investment giants Goldman Sachs (GS) and Morgan Stanley (MS) both raised their 2011 price targets for a slew of commodities. This came a few short weeks after lowering their expectations for the same basket of commodities. In the U.S., the Commerce Department said new home sales rose +7.3% to a seasonally adjusted 323,000 annual rate. This was the highest reading since December 2010 and the second straight increase. However, compared to the same period last year, sales tanked –23.1%.
Before Wednesday’s open, the Organisation for Economic Cooperation and Development (OECD) lowered their 2011 Economic Outlook and said risks to the global recovery remain significant. The organization said that both the US and Japan “have yet to produce credible medium-term plans” to stabilize their debt which could flare up and curtail the global recovery at any moment. Other risks include: periphery debt in Europe and an economic slowdown in China/Asia. The report recommends that the Federal Reserve should raise rates while the European Central Bank should hold rates steady until the periphery debt issues are resolved. Angel Gurria, the secretary general of the OECD, said, “A key message of this economic outlook is that there is no room for complacency. The crisis is not over yet. It has just changed its skin.” The report believes that the global economy will expand by +4.5% in 2011 and 2012. In the U.S., durable goods orders missed estimates and plunged last month which bodes poorly for the ongoing economic recovery. In other news, the FHFA’s home price index fell another -0.3%in March. This was the fifth consecutive monthly decline and ominous news for the ailing housing market.

Thursday & Friday’s Action: GDP, Jobless Claims, & Pending Home Sales Disappoint:

Before Thursday’s open, the Commerce Department said Q1 GDP was unrevised at +1.8% which fell short of the Street’s +2.1% estimate and much lower than Q4′s +3.1% rate. The report showed that demand contracted while inventory advanced which is not a healthy equation. In other news, the Labor Department said weekly jobless claims rose +10,000 to 424,000 last week. The report topped estimates by 20,000 and bodes poorly for the fragile jobs market. Before Friday’s open, Fitch rating agency lowered Japan’s rating to negative. Economic data in the U.S. was mixed: personal income and spending rose +0.4% which matched estimates, consumer sentiment briefly topped estimates, and pending home sales plunged -11 points to 81.9. Pending home sales fell -11.6% from March’s downwardly revised reading and is much lower than the same period last year.

Market Outlook- Market In A Correction

From our point of view, the market is in a correction as a new downtrend has formed and the 50 DMA line is broken for many of the major averages.  Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. Distribution remains elevated (heavy selling from the institutional community) and leading stocks continue to lag. Looking forward, the next level of support is the 9-month upward trendline and the next level of resistance is the 50 DMA line and then the 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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A Clear Downtrend Has Formed

Thursday, May 26, 2011
Stock Market Commentary:

Stocks and a host of commodities gave back overnight gains and opened lower after GDP and jobless claims 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.

GDP & Jobless Claims Disappoint:

Before Thursday’s open, the Commerce Department said Q1 GDP was unrevised at +1.8% which fell short of the Street’s +2.1% estimate and much lower than Q4’s +3.1% rate. The report showed that demand contracted while inventory advanced which is not a healthy equation. In other news, the Labor Department said weekly jobless claims rose +10,000 to 424,000 last week. The report topped estimates by 20,000 and bodes poorly for the fragile jobs market.

Market Outlook- Market In A Correction

From our point of view, the market is in a correction as a new downtrend has formed and the 50 DMA line is broken for many of the major averages.  Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. Looking forward, the next level of support is the 9-month upward trendline and the next level of resistance is the 50 DMA line and then the 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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Weak Economic Data; Stocks Still Below 50 DMA Line

Wednesday, May 25, 2011
Stock Market Commentary:

Stocks and a host of commodities bounced on Tuesday after Monday’s strong sell off. 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.

OECD; Global Recovery Still In Jeopardy, Durable Goods Miss Estimates & Home Prices Fall:

Before Wednesday’s open, the Organisation for Economic Cooperation and Development (OECD) lowered their 2011 Economic Outlook and said risks to the global recovery remain significant. The organization said that both the US and Japan “have yet to produce credible medium-term plans” to stabilize their debt which could flare up and curtail the global recovery at any moment. Other risks include: periphery debt in Europe and an economic slowdown in China/Asia. The report recommends that the Federal Reserve should raise rates while the European Central Bank should hold rates steady until the periphery debt issues are resolved. Angel Gurria, the secretary general of the OECD, said, “A key message of this economic outlook is that there is no room for complacency. The crisis is not over yet. It has just changed its skin.” The report believes that the global economy will expand by +4.5% in 2011 and 2012.
In other news, durable goods orders missed estimates and plunged last month which bodes poorly for the ongoing economic recovery. In other news, the FHFA’s home price index fell another -0.3% in March. This was the fifth consecutive monthly decline and ominous news for the ailing housing market.

Market Outlook- Market In A Correction

From our point of view, the market is in a correction as a new downtrend has formed and the 50 DMA line is broken for many of the major averages.  Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. Looking forward, the next level of support is the 9-month upward trendline and the next level of resistance is the 50 DMA line and then the 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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50 DMA Line Is Resistance

Tuesday, May 24, 2011
Stock Market Commentary:
Stocks and a host of commodities bounced on Tuesday after Monday’s strong sell off. 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.

German Economic Data Tops Estimates; New Home Sales Rise, Stocks & Commodities Bounce:

Before Tuesday’s open, business confidence in Germany was unchanged in May which topped expectations for a negative reading. Germany is Europe’s largest and strongest economy and is largely the binding force for the entire Euro. Therefore, any stronger than expected economic data is typically well received as investors across the globe are keeping a close eye on the entire continent. In other news, investment giants Goldman Sachs (GS) and Morgan Stanley (MS) both raised their 2011 price targets for a slew of commodities. This came a few short weeks after lowering their expectations for the same basket of commodities. This flippant behavior is typical for many large investment banks and is why we isolate the “noise” and focus our client’s collective attention on what matters most: market action. In other news, the Commerce Department said new home sales rose +7.3% to a seasonally adjusted 323,000 annual rate. This was the highest reading since December 2010 and the second straight increase. However, compared to the same period last year, sales tanked –23.1%.

Market Outlook- Market In A Correction

From our point of view, the market is in a correction as a new downtrend has formed and the 50 DMA line is broken for many of the major averages.  Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. Looking forward, the next level of support is the 9-month upward trendline and the next level of resistance is the 50 DMA line and then the 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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Another Lousy Week For Stocks

Friday, May 20, 2011
Stock Market Commentary:

Stocks and a host of commodities ended mixed to slightly lower this week as concern spread that economic growth may wane in the weeks and months ahead. 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.

Monday-Wednesday’s Action – 50 DMA line Is Support

Over the weekend, the head of the International Monetary Fund, Dominique Strauss-Kahn, was accused of raping a cleaning lady at a NYC hotel. This story dominated the headlines all week and forced him to resign as the director of the IMF. In other news, the earnings and economic data was mixed to slightly lower. Before Monday’s open, the NY Empire State manufacturing index fell nearly 10 points to 11.88 which was higher than the boom/bust level of zero which signaled expansion, albeit at a slower rate than prior months. In other news, the National Association of Home Builders released its housing market index which is based on a survey in which respondents from the organization rate the condition of the general economy and the housing market. The index matched the last reading of 16 which suggests more time is needed before the ailing housing market improves.
Before Tuesday’s open a slew of high profile companies released mixed-to-lower Q1 results and the latest economic data missed estimates. The Commerce Department said housing starts (a.k.a. new homes being built), fell -11% from March and missed the Street’s estimate of 569,000. Work began at an annual pace of 523,000 houses last month. The report showed that building permits, a sign of future construction, also fell. This was the latest in a series of disappointing data from the ailing housing market. A separate report showed that industrial production was unchanged in April which fell short of the Street’s estimate for a +0.4% increase.
Before Wednesday’s open, a slew of high profile companies (DELL, DE, TGT, among others) released their Q1 results which largely topped analyst estimates. At 2pm EST, the Federal Reserve Open Market Committee (FOMC), released the minutes of their latest meeting which largely reiterated their recent stance that the economy is improving while inflation pressures are largely short-term in nature.
According to the Stock Trader’s Almanac, there is some truth to the old adage, “Sell in May and Go Away. On average, the Dow Jones Industrial Average has rallied +7.4% during the period of November 1 through April 30 since 1950 (post WWII). The data also shows that the Dow Jones Industrial Average has only risen by +0.4% between May 1 and October 31. Further analysis of the data shows that the worst six-month periods in the market’s post WWII history have occurred between May-November (2010, 2008, 2002, and 2001, to name a few).

Thursday & Friday’s Action – 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. Stocks fell on Friday as concern spread that economic growth may slow after QE II ends in June.
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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Slower Economic Growth Ahead?

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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