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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    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 important upward trendlines. Since the beginning of May, we have urged our clients and readers to be extremely cautious as the major averages and a host of commodities began selling off.
    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. We have received a lot of “thank you” emails for being “spot on” and our cautious approach. We are humbled by your presence and very thankful for your continued support. Looking forward, the next level of resistance for the major averages is their respective 50 DMA lines then their 2011 highs. The next level of support is their longer term 200 DMA lines. If you are looking for specific help navigating this market, please contact us for more information.
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