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. the Eurozone remains mired in “inaction.” 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 1341; and the standard 200-dma support level at 1521. But perhaps more importantly, the distance above the 160-wma has has now faltered below the +23% “bubble-like rally” threshold. This is a warning sign to be sure; especially given 1600 was violated to the downside.
WORLD MARKETS ARE MIXED AS WE BEGIN MONDY MORNING as there is very little on the overnight news line that would push prices either sharply higher or sharply lower. In effect, Europe shall be leaving on vacation for the month of August, and they are likely to continue “book squaring” in lieu of relaxing on a beach and understanding perhaps that their years may have been made at this juncture. And why not? With the German DAX up +10% YTD, and the continued uncertainly surrounding the Fed and tapering, as well as the US Congress and the budget deficit upcoming…it would be reasonable to step back and reassess after a month on the Riviera. If we were so lucky, then we would certainly do so. But truth be told, a hot, dusty baseball field coaching our 12U travel baseball team (Lower Merion Hawks) in a close game is better than any day on the Riviera – every time.
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