Friday, May 6, 2011
WHACKING THE BULLS
After last week’s strong rally, it was time for the bears to show some muscle and pull the major indexes back into reality territory. After 4 days of selling, euphoria about today’s better than expected jobs report pulled the market out of the doldrums via a sharp opening upside spike.
I am not sure if this was a partial dead cat bounce, but sentiment changed in a hurry on news reports that Greece may abandon the European Union and create its own currency. That took the starch out of the upward momentum and, while we ended up closing in plus territory, we came way off the highs for the day.
Yesterday’s selling pushed one our holdings, the commodities index (DBC), below its trailing sell stop by a slight margin. As is my custom, I watched the market open this morning with DBC making a nice rebound. Upward momentum faded as the session progressed, and I ended up liquidating this position before it headed further south again. None of our other holdings were affected by this past week’s market slide.
Employment growth provided the initial boost with payrolls growing by 244,000, which was far better than the consensus range of 185,000 to 200,000. However, the unemployment rate inched up from 8.9% to 9%.
Gold rebounded today, but crude oil and silver continued to slide with oil having lost 14.7% this week, while silver gave back 27.4%. Interest rates rose along with the dollar index.
Our Trend Tracking Indexes (TTIs) pulled back a little from last Friday’s close but remain in bullish territory by the following percentages:
Domestic TTTI: +4.76% (last week +5.98%)
International TTI: +4.72% (last week +7.10%)
While the better than expected unemployment report took center stage, worries persisted about Thursday’s disappointing jobless claims report, which may affect the jobs picture in May or June.
As a result, and absent any major negative events, we may see the market trade in sideways pattern until a better picture about the true economic strength, or lack thereof, emerges.
Have a great week.
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