Rally Ends; Stocks Smacked

Thursday, June 23, 2011
Stock Market Commentary:

Stocks and a slew of commodities got smacked on Thursday after the Fed meeting and a slew of disappointing economic data was released. Thursday’s ominous action effectively ended any chance of a rally and suggests the bears are back in control of this market.

Jobless Claims Rise, New Home Sales Fall, & IEA Takes Emergency Measures:

Before Thursday open, the Labor Department said weekly jobless claims rose +9,000 t0 429,000 last week which still above the dreaded 400,000 level. Elsewhere, new home sales slid -2.1% in May to 319,000, which topped the Street’s 305,000 estimate. In a healthy data point for the ailing housing market, the number of new homes on the market fell -6,000 to 166,000 which was the lowest level in 50 years. In  a surprise move to lower energy prices, the International Energy Agency (IEA) said 60 million barrels of oil would be released from strategic government stockpiles across the globe. The underlying logic behind the move was that lower oil prices may help stimulate the global economy. Only time will tell.

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 are 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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