Market Closing Thoughts:
At 1:45 the markets moved higher with some ‘moderate’ green volume but didn’t last as the markets turned South gradually with a moderate red-green volume battle at the close as the bears took charge at the last minute of profit taking. The after market really took a dump, but then so did yesterday.
European markets finished broadly higher today with shares in France leading the region. The CAC 40 is up 1.14% while Germany’s DAX is up 0.91% and London’s FTSE 100 is up 0.49%. Asia closed earlier down next week.
The S&P downgrade of Spain has taken some wind out of the market sails and continued fall-out may weaken the markets even further next week. I will not put myself out on the limb and do a Ha-Ha for Monday. I think Mr. Market reads this column, laughs and does the opposite.
“S&P downgrades Spain for the second time this year. S&P has cut Spain two notches to BBB+ from A, with a negative outlook, saying the country’s “budget trajectory will likely deteriorate against a background of economic contraction in contrast with our previous projections.” As if to underscore S&P’s move, unemployment rose to 24.4% in Q1 from 22.9% in Q4, marking the highest rate in 18 years. “
The 500 at the close.
The $RUT at the close.
The DOW at the close. At this point your guess is good as mine.
The Indexes at the close.
Midday Market Comments:
Not much to report in that the volume has fallen off to anemic levels while loosing some steam from the morning brisk activity. All major markets are currently in the green and trading in a quiet but tight range. The DOW is up 0.21% at 13232, the 500 is up 0.21% at 1402 and the $RUT is up 0.42% at 821.
Gold is at 1641, but trading in the middle of it range today. The oils are quiet and remaining in the morning ranges reported earlier. The market trend bias is nutral to positive.
Mid Morning Comments:
We are once again seeing some market action after 4 months of a ‘Moon-Shine Rally’ and it is comforting to say the least. At this point I don’t care if the market goes up or down, just so long as we have volume in which to trade. By 10:30 the volume has trailed off and DaBoyz can do their thing.
The bad news for those who are long is that we are possibly seeing a real top because every time the market eases up the bears pounce and drag it down as we witnessed this morning. The red volume this morning is not close to what we have witnessed in the past 10 sessions, but it is still notable and should be a wake-up call to the bulls. The ‘Dippers” are buying, but the jury is still out as to where today’s market is headed.
Yesterday, before the close I was convinced the markets wouldn’t rise, but they did leaving me scratching my head. After looking a the data, I think the SP500 can inch its way up to the low 1420’s once again if next weeks reports have some good news. If not, I predict the trend will be down and form another sideways channel. Only a catastrophic Black Swan will make this market waterfall I believe.
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Market Opening Comments:
Market opened up as expected with moderate green volume. As the first few minutes pasted the DOW moved to 13241, the SP500 moved to 1404 and the Russell 2000 moved to 819. As the opening ten minute mark came around the market highs could not hold and began slipping.
The red volume soon took over in some profit taking, but the bears kept the market in the high range of the morning without loosing much ground. The scene changed by the 20 minute mark as the bears started wining the tug of war. $RUT fell below its close yesterday, the DOW is backpedaling fast and the 500 is also below it close yesterday.
The market direction bias is negative just before the 9:55 and analyst’s say no change is expected.
The numbers that came in for the April UNIVERSITY OF MICHIGAN CONFIDENCE INDEX rises to 76.4 from 75.7. The markets showed a minor tick up and the volume returned to green for a few minutes and the down trend bias continued turning all candles red, deep red.
Ford revealed this morning an adjusted first-quarter earnings of 39 cents a share on revenue of $32.4 billion, topping expectations of 35 cents a share on $31.27 billion.
The SP500 futures was as high as 1400.55 this morning and started to slip just a bit, but by 8:30 when the financial’s were announced it moved down in a bit more. After GDP big miss treasuries turn up, dollar stays down, oil’s ease down, gold eases up.
Premarket has the DOW up 22, the NASDAQ up 10.75, the 500 up4 and SSO up 0.90. The USD moved from 79.33 to 78.80. Copper jumped yesterday to 3.77 and is currently at 3.80 this morning. Selling the news is NOT what is happening as the SP500 rose back up to it early morning high to 1400.91.
Last night after the close, Procter & Gamble posted an adjusted fiscal-third quarter EPS of 94 cents, topping forecasts by a penny. The consumer products company’s sales came in at $20.19 billion, shy of the $20.29 billion Wall Street expected. The after market actually fell a few points.
U.S. Personal consumption (1QA) rose 2.9%, higher than 2.3% estimated, previously 2.1%.
U.S. Gross domestic product price index (1qa) rises 1.5% vs. 2.1% projected, previously 0.9%
U.S. Employment cost index (1Q) increased 0.4% vs. 0.5% anticipated, previous gain was revised to 0.5% from 0.4%.
U.S. Core PCE (QoQ) (1QA) increased 2.1% in line with expectations, previously 1.3%
“Nearly one in four Spaniards are now out of work, according to official data on Friday, as Standard & Poor’s cut the country’s credit rating by two notches over its debt burden and ailing banks.”
The US economy expanded by less than forecast in the first three months of the year, after slower inventory growth and weak business spending weighed on a consumer spending boom and the biggest gain in housebuilding in almost two years.
Economists were divided over whether the weaker-than-expected growth figures would increase the likelihood of QE3. Richard Franulovich at Westpac said:
“The weaker-than-expected GDP growth is still consistent with moderate growth in the U.S. I do not think that this in any way adds to speculation about QE3 because the numbers are within the Federal Reserve’s range. We did get a move lower in the dollar against the yen, but in the end, all these moves could be short-lived. Risk assets want to go higher. “
…while Daniel Hwang at Forex.com noted:
“GDP was worse-than-expected and that increases the chances of the Fed launching QE3. Markets shrugged off the Spanish rating action and we could see risk assets continue upward momentum on expectations of a Fed move. This is negative for the dollar as it increases QE3 chances. Some of the other data may offset GDP a bit and we could see some back-and-forth action today.”
“Standard & Poor’s has cut Spain’s sovereign credit rating to BBB+ from A. Spanish unemployment moved up to 24.4% in March – worse than the 23.8% expected.
Italy’s borrowing costs are inching towards 6% again.
AMZN is up almost 17% after earnings. PG, MRK and F did well with earnings, but PG is taking a hit in pre market trading.
A week ago I argued the market was trading in a bearish wedge or flag having just moved through a longer term trendline (not shown below). Not any more. With the successful test of the low from two weeks prior and the forceful move up the last two days, the overall pattern has been neutralized. 1400 is still a level that needs to be dealt with, but the combination of the last couple days has been a step in the up direction.
I’ve had a defensive posture for a couple weeks. It’s mostly kept my stress level very low. If you’ve been bearish, you’ve seen paper profits either wiped out or significantly reduced. If you’ve maintained a bullish stance, you’re breathing easier now, but you felt a lot of heat for a couple weeks. And if you held into an earnings report, you’re nuts. Big moves have been the norm after companies have released this season.
Since the overall trend remains up and the intermediate term trend has neutralized, I’ll have a bullish bias heading into next week – assuming nothing major happens today.”
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Written by Gary