Worst Week of The Year; SP500 Tests 50 DMA Line

The market rally is under pressure as we are beginning to see elevated levels of distribution across the board.  We are also entering the “Sell in May” time-frame which has worked almost perfectly over the past three years. Since 2010, the DJIA has fallen 800 points in the latter of of Q2. Only time will tell whether or not this is another “normal” pullback or the beginning of something more ominous. So far, the market is bending but has not broken…yet. Remember, the primary catalyst

Stocks fell hard on Monday after the despicable events occurred at the Boston Marathon and a slew of weaker-than-expected economic and earnings data was announced. The big news was that a slew of commodities plunged overnight. Most notably, Gold & Silver Plunged 10% and 13% respectively which sent gold down over 140 points in one day! It is important to note that both, gold & silver are in bear markets which means the path of least resistance is lower until some sort of bottom is forged. The commodity sell-off occurred after China, a growth engine for the global economy, said its economy “only” grew by 7.7% in Q1 which missed the Street’s estimate for 7.9%. In the US, the NY manufacturing index missed estimates. The index grew by 3.05 in April down from 9.24 in March which is another “sluggish” data point. On the M&A front, Sprint Nextel (S) vaulted over 16% after Dish Network (DISH) offered to acquire the telecom company for $25.5 billion in cash and stock.

Stocks rebounded sharply on Tuesday after investors digested the latest round data. Most notably, Citigroup (C) rallied but Wells Fargo (WFC), JP Morgan (JPM), Goldman Sachs (GS), Bank of America (BAC), Morgan Stanley (MS), and Bank of New York Mellon (BK) fell after announcing their Q1 results. Economic data was positive after new home sales jumped to their highest level since 2008 and topped estimates. Elsewhere, the consumer price index (CPI) slid in March for the first time in four months as the cost of gasoline continued to fall. So far, inflation has not been a threat and the narrative is slowly shifting toward deflation.

Stocks opened lower on Wednesday after the Financial Times said a senior auditor in China warned that local government debt is “out of control.” Elsewhere, the IMF downgraded its outlook for US growth to 1.9% in 2013 and 4% in 2014 which adds pressure for the additional pressure. The IMF also said that it sees 20% of corporate debt unsustainable in parts of Europe, which put pressure on European shares. The Fed’s Beige Book indicated general economic conditions are improving and mostly stronger than expected.

Stocks slid on Thursday as investors digested the latest round of lackluster economic and earnings. So far, Q1 earnings for companies in the S&P 500 slid by -0.4% according to the Wall Street Journal and Fact Set. Needless to say, this is not a healthy data point. Economic data was less than stellar on Thursday. Both the Philly Fed Index and Leading Indicators missed  estimates which bodes poorly for the ongoing economic recovery. Meanwhile, weekly jobless claims rose by 4k to 352k which topped the Street’s estimate for 350k. Stocks were mixed for most of the day on Friday after Suspect 1 died in a shootout with Police and suspect 2 is still at large by the close. Investors digested a slew of mixed earnings data from some of the country’s largest companies (GOOG, IBM, MSFT, GE, MCD, CMG, among others).