STOCKS:
The world economy is weakening: the US payroll tax increase and “sequestration” are pressuring the US economy; China is being pressured by Japan, and has “dampened” their housing market. However, the Eurozone is seriously contemplating loosening up their austerity plans. For now, although we feel that risk is being mispriced at current levels given recent pressure upon world economic figures and the developing pressure upon corporate margins/ earnings — the consensus is that the
world’s central banks will save the day.
STRATEGY: The S&P 500 remains above the 160-wma long-term support level at 1311; and the standard 200-dma support level at 1478. But perhaps more importantly, the distance above the 160-wma has grown to +27%...which now means that a “bubble-like” rally is developing, and we can see sharp gains such as 1987 and 1995-1996. Hold your nose!
WORLD MARKETS ARE ONCE AGAIN “MIXED” as it is very clear they are trading on reduced volume levels as the approaching Memorial Day holiday approaches in the US. This weekend is the “unofficial start” of the summer season; and we shall see traders take a long weekend to enjoy the warm weather especially here on the East Coast. Also of interest this morning, is that the markets await Fed Chairman Bernanke’s 10am ET testimony before Congress’ Joint Economic Committee on the subject of anything economic and monetary policy related. This is his first testimony since February, and thus will be important. Too, the FOMC minutes from the April 30-May 1 meeting will be released at 2pm ET. So, it is a Fed day first and foremost, and this is solely what the capital markets shall be focused upon given there is very little in the way of economic reports.
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