Stock Market Bulls And Bears Face Off This Week

Stock market bulls and bears face off this week in an epic struggle to regain upside advantage.  This week’s blizzard of economic data along with the impending conclusion of quantitative easing will make for interesting days ahead.

On My Radar

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Looking at a chart of the S&P 500 (NYSE: SPY) you’ll see how the index barely reclaimed the all important 50 Day Moving Average in late action last week and recent short term downward momentum appears to be turning back up.  A stiff layer of resistance lies just above at the 1335-1340 level and stocks finished the week with a mild decline to log their fourth down week in a row.

The Economic View From 35,000 Feet

Last week the economic news was predominantly negative as pending home sales declined sharply by -11.6% from a previous +3.6% and consumer spending came in just slightly lower than expected.

Higher unemployment for the week was another unexpected surprise as well as a weaker than expected revision to 1Q GDP.

The Greek crisis continues to reach a boiling point with the IMF rumbling that they might withhold the next tranche of the promised bailout.  Over the weekend, unannounced emergency negotiations were in play as Greece approaches its D-Day of June 29th when the next IMF aid transfusion is due.  Apparently Greece hasn’t met its deficit reduction goals in spite of austerity programs that have triggered widespread unemployment, strikes and protests in the country.

Ireland added to the European malaise over the weekend as an Irish cabinet member said that Ireland might need another round of help, as well.

Markets don’t like uncertainty and so yields on the two year Greed bond soared to more than 26%.  This is a fast moving environment and one that will have widespread repercussions for not only Europe but all global markets, including the United States.

The only positive news I saw all week was a rise in the Michigan Consumer Sentiment index to 74.3 from 72.4

At home, quantitative easing continues to prop up equities markets and so the big question is what happens when it ends in June and if the economy can stand on its own with reduced levels of government support.

Major economic reports are on the way this week that could offer some clarity to future market directions.  And keep an eye on Greece as the situation there reaches a bubbling boil.

What This All Means To You

Summer months remain treacherous and the outcome of the current standoff between bulls and bears could likely set the direction and tone for the season.

At Wall Street Sector Selector, we continue to expect lower prices ahead in global stock markets and maintain our inverse ETF and put option positions.

The Financial News Week Ahead

Major Issues/Themes: Huge reports this week in housing, manufacturing, construction and employment will be coming at us t his week, topping off on Friday with the May Non Farm Payrolls report. 

Tuesday: March Case/Shiller Housing Index, May Chicago PMI, May Consumer Confidence

Wednesday: May ADP Employment, May ISM, April Construction Spending, May Car Sales.

Thursday: Initial Unemployment Claims, Continuing Claims, April Factory Orders

Friday: May Non Farm Payrolls, May Unemployment, May ISM Non Manufacturing

ETF Spotlight

Leaders: (NYSEArca: IAU) Gold (NYSEArca: IYE) Energy

Laggards: (NYSEArca: EWY) South Korea (NYSEArca: EWI) Italy

This Memorial Day, let’s take a moment to honour American soldiers, both veterans and current members of our armed services.  The United States has been at war now for nearly 10 long years and this burden has been borne by a relatively small number of our citizens in today’s all volunteer age.  These families have endured death, injury, multiple deployments and painful family separations while the rest of us have had the opportunity to go about our normal daily lives, personally untouched by the wars in Iraq and Afghanistan.  We salute and thank you for your service.  You are America’s best.

Wishing you a great weekend and week ahead,

John

 

 

 

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