2nd Quarter & QE2 End, Finally!

Thursday, June 30, 2011
Stock Market Commentary:

It has been long first half of the year for global capital markets. Stocks and a slew of commodities hit fresh 2011 highs on May 2, the day after Osama Bin Laden was taken out. In early May, many of these so-called “risk” assets got smacked and spent the next 4-6 weeks pulling back before finding support near their respective 200 DMA lines. The underlying fundamental concern is that the global economy is slowing down and QE 2 is slated to end on June 30, 2011. The major averages remain trapped in the middle of their multi-week sideways trading range with support near the 200DMA and resistance near their 50DMA lines.

Jobless Claims, Chicago PMI Beat Estimates, & QE 2 Ends:

On Thursday, the Labor Department said initial jobless claims fell by -1,000 last week to 428,000. The longer term four-week average, came in at 426,750, which remained above the dreaded 400,000 mark. Investors were happy to see that Chicago PMI jumped to 61.1 which easily topped the Street’s estimate for 53 and bodes well for the economic recovery. In other news, the second quarter came to a close which also marks the end of the Fed’s QE II program. It will be interesting to see if risk assets and the broader economy can continue to advance even when QE II is off the table.

Market Outlook- Market In A Correction:

The market is back in a correction after another failed follow-through day on Tuesday, June 21, 2011. Now that we are back in a correction, defense remains the best offense. The next level of support for the major averages is their respective 200 DMA lines and then their March lows. The next level of resistance for the major averages is their respective 50 DMA lines. Trade accordingly.

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. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. Two days later, on Thursday, June 23, 2011, our outlook changed to “Market In A Correction”after the market sold off hard on renewed economic woes. If you are looking for specific help navigating this market, please contact us for more information.

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