Wednesday, August 3, 2011
Stock Market Commentary:
The week long sell off ended on Wednesday after all the major averages flushed out below several key technical levels before turning positive for the session. In addition to positively reversing, Wednesday marked Day 1 of a new rally attempt which means that the earliest a new rally may be confirmed will be next Monday, providing Wednesday’s lows are not breached. The bears remain in control of this market until the major averages close above their respective moving averages (50 & 200). Put simply, the next level of support are the 2011 lows and the next level of resistance are the 2011 highs.
ADP Report Tops Estimates, Factory Orders & ISM’s Service Index Miss Estimates:
Before Wednesday’s open, ADP said private payrolls rose +114,000 in July which topped the Street’s estimate of 100,000. The report is still low but was much better than the Street’s whisper number of below 100,000 but bodes well for Friday’s payrolls report. After the open, factory orders and the ISM service index both missed estimates. Factory orders slid -0.8% while the ISM service index fell to 52.7 in July from 53.3 in June. This was the latest in a series of weaker-than-expected economic data which suggests the economy may be heading for a double dip recession. It was also interesting to see Ben Bernanke announce that he will be speaking in late August in Jackson Hole WY. That happens to be the 1 year anniversary from when he announced QE2. Legendary bond investor Bill Gross said he expects QE3 to be announced at some point in the near future.
Market Outlook- Market In A Correction
The latest action in the major averages suggests the market is back in a correction as all the major averages remain below key technical levels. Our longstanding clients/readers know, we like to filter out the noise and focus on what matters most: market action. That said, the recent action suggests caution is paramount at this stage until all the major averages rally back towards their respective 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.