Daily Market Commentary

Late Day Rally Curbs Early Selling As Global Rout Continues

06 Sep

Tuesday, September 6, 2011
Stock Market Commentary:

Stocks were closed in the U.S. on Monday in observance of the Labor Day Holiday. However, overseas, stocks were smacked as a new round of fears spread concerning the ongoing EU debt saga and the health of the global economy. Stocks were smacked on Tuesday as the U.S. markets played catch up and fear spread that the U.S. and global economy would fall into a double dip recession. At this point, the current rally is under pressure evidenced by several distribution days (heavy volume declines) since the latest FTD. It is important to note that even with the latest FTD, the major averages are still trading below several key technical levels which means this rally may fade if the bears show up and quell the bulls’ efforts.

Monday-Tuesday’s Action: Global Jitters Smack Stocks

U.S. stocks were closed on Monday for the the holiday however equity futures were open and fell hard as European markets plunged to fresh 2011 lows in heavy volume. In recent weeks, European markets, specifically Germany’s DAX, tends to lead the U.S. markets (both higher and lower). Therefore, the fact that several European markets are at new 2011 lows bodes poorly for U.S markets. The Institute for Supply Management (ISM) said its service-sector index rose to +53.3% last month from +52.7% in July. This topped the Street’s expectation for +51% and topped the boom/bust level of 50.

Swiss Central Bank Defends Currency:

On Tuesday, European stocks rebounded slightly after the Swiss National Bank set a minimum exchange rate target for its franc at 1.20 per euro and stands ready to buy foreign currencies at unlimited quantities. This move helped stabilize European markets, in the short term, before the seller showed up and sent stocks lower. Even with the move, concerns remain regarding the so-called PIIGS (i.e. Portugal, Ireland, Italy, & Greece). In Italy, general strikes are taking place amid austerity plan discussions and later this week, Greece’s PM is going to give a critical speech regarding the country’s dire economic condition. In the U.S. President Obama is expected to give a speech on Thursday night to address the ailing jobs situation.
Market Outlook- Rally Under Pressure
The major averages confirmed their latest rally attempt on Tuesday, August 23, 2011 which was the 11th day of their latest rally attempt. It is important to note that all major rallies in history began with a FTD however not every FTD leads to a new rally (i.e. several FTDs fail). In addition, it is important to note that the major averages still are under pressure as they are all trading below their longer and shorter term moving averages (50 and 200 DMA lines) and are all still negative year-to-date. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. This rally will fail if/when several distribution days emerge or August’s lows are breached. Until then, the bulls deserve the benefit of the doubt. If you are looking for specific help navigating this market, please contact us for more information.

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29 Dec
Daily Market Commentary

Stocks Rally On Economic Data

Gold Hit A New 2011 Low & Is Officially In A Bear Market

Gold Hit A New 2011 Low & Is Officially In A Bear Market

Thursday, December 29, 2011
Stock Market Commentary:

Stocks opened higher after the latest round of economic data was announced and an Italian bond auction came in below the worst case scenario that many pundits were worried about. From our point of view, Thursday marked Day 7 of the current rally attempt which means the window is now open for a new follow-through day to emerge [as long as Tuesday’s (12/20/11) lows are not breached]. The benchmark S&P 500 index continues flirting with positive territory for the year and its 200 DMA line.

Italian Bond Auction, Jobless Claims, & Pending Home Sales:

On Thursday, stocks opened higher as investors digested a host of economic data. Italy managed to sell 7.02 billion euros ($9 billion) of bonds which missed their target but borrowing costs fell which helped allay concerns regarding the health of the Italian government to finance the world’s fourth largest debt-load. In the U.S., the labor department said weekly jobless claims rose by 15,000 to a seasonally adjusted 381,000 but remained under the closely followed 400,000 level for the fourth straight week. The report was a little worse than the Street’s expectations for 375,000. Elsewhere, pending home sales rose by +7.5% in November which easily topped the Street’s estimate and is the highest level in 19 months.

Market Outlook- In A Correction

Risk assets remain under pressure as gold continues trading below its 200 DMA line and other capital markets continue to fall. We find it very disconcerting to see other (leading) risk assets flirt with fresh 2011 lows in recent weeks. China’s Shanghai Composite (normally a leading risk on/off indicator) has fallen below its October low and hit a new 2.5 year low. The euro, which is strongly correlated to U.S. stocks and other risk assets also took out its October low on Tuesday (12/13) which is not ideal. Meanwhile, Gold sliced below its longer term 200 DMA line on on Wednesday (12/14) for the first time since August 2008 (1-month before Lehman failed) and remains below that critical level. Other risk assets such as Oil, Silver, Copper, etc are also under pressure which suggests the global risk off trade is getting stronger.  As an easy reference point, if the benchmark S&P 500 would simply fall to its Oct low, that would be 1074! Sometimes, caution is king.
What we have seen from the October 4, 2011 low was simply an over sold bounce into a logical area of resistance (200 DMA line). Now that the 200 DMA line was taken out it will be important to see how long the market can stay above this important level. 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!
 

04 Feb
Blog, Uncategorized

Debt: How The World Economy Works

In a small town in Europe..It is raining, and the little town looks totally deserted. It is tough times, Everybody is in debt, and everybody lives on credit
Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to choose one. The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher. The butcher takes the 100 Euro note, and runs to pay his debt to the pig grower. The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel. The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town’s prostitute that in these hard times, gave her services on credit. The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there. The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything..
At that moment, the tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town. No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism. And that, ladies and gentlemen, is how the world is doing business today.