Correcting Market

My opinion on market direction has not changed, I still believe lower prices are ahead of us. The markets are oversold and have been due for a short term bounce (still has not occurred yet).  The fundamentals of the economy both in the US and particularly in Europe continue to deteriorate on an intermediate term basis.  The Greece debt crisis and the potential default are an overhang on the markets, as well as slowing growth and inflationary pressures worldwide.  Below is a chart of the S&P 500, and where I believe we may be headed in the near term, which is prior support or at least a 200 day moving average test.

A break of the prior support in March would be a negative for the technical picture, and would change the intermediate term picture to down trending, from its current up trend. The longer term trend has not changed yet, and continues trending higher.  

Bottom Line:  Plenty of people have already called last weeks low the bottom for this correction.  I am neutral to that assumption on a technical basis and feel there are plenty of risks to creating new equity positions today.  As usual, it should be an interesting week ahead.  Thanks for stopping by.  

 

Contact: 586-431-8000

Friday Recap

Stronger US dollar = weaker stocks.  Today the US dollar gained against the Euro and stocks closed lower. I wrote about this relationship here Weaker Dollar = Higher Stocks.  But now the opposite is happening, which is a stronger dollar is having the effect of pushing stocks lower.  Below is a chart that shows this non-correlated relationship.

The S&P 500 has broken prior support and is heading down to the 200 day moving average.  That should be a good test for this market.  Also at the 200 dma is another support low for this year.  A break of that level with the markets as oversold as they are, would be a big negative for stocks.

Bottom Line:  The markets are down -6.9% from this years high, but still higher for the year +1.47%.  In the short term the S&P 500 is very oversold, but I think a test of the 200 dma is in the works.  We would not be putting any cash to work until there are signs of a successful test of prior support (or 200 dma) or a confirmed trend reversal. Thank you for reading.

 

Friday Market Wrap

Economic news caught up with stocks this week.  It was quite a volatile day and week, stocks are now short term oversold, so I am expecting some consolidation at these levels.  The S&P 500 is trading below both the 50 and 100 day moving averages and just above a prior support low (per chart below), volume is above average, but not extreme. Holding that prior level of support is technically important.  If a break of that low, then I would expect a move lower to the 200 day moving average, which is another -4.7% down from today's close.

Bottom Line:  The major concerns are slowing growth, euro zone debt issues and emerging market inflation. The markets are oversold and due for a bounce or at the very least some consolidation at present levels.  A break of prior support, then I would get even more conservative by placing tighter stops to manage risk.  Thanks for stopping by.

 

Contact: 586-431-8000