Wednesday, May 11, 2011
Stock Market Commentary:
Stocks and a host of commodities fell as the bears showed up after a three day hiatus and sent a slew of global markets lower in heavy trade. Oil, silver, gold, and a host of other closely followed commodities fell after a brief rebound from last week’s week-long “Flash Crash.” From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.
Inflation Rises Overseas While Trade Deficit Widens In U.S.
On Wednesday, China said consumer prices jumped +5.3% in April (from the same period in 2010) and lending exceeded analysts’ estimates. The news will likely prompt China’s central bank to raise rates (i.e. tighten monetary policy) to curb inflation and cool their red-hot economy. Inflation in Germany, Europe’s largest economy, also topped estimates and rose by +2.7%. Global markets fell as fear spread that Chinese demand will slow.
In other news, the U.S. trade deficit widened more than forecast in March due to surging commodity prices which eclipsed record exports. The Commerce Department said the trade deficit rose +6% to $48.2 billion, the largest since June 2010, from $45.4 billion in February.
Market Outlook- Rally Under Pressure
From our point of view, the market rally is under pressure which suggests caution is paramount at this stage. Looking forward, the next level of support for the major averages are their respective 50 DMA lines and resistance is their 2011 highs. The rally remains in tact as long as support holds. If you are looking for specific help navigating this market, please contact us for more information.