Friday, June 3, 2011


We left the month of May on a high note and, only one day later, stumbled into the month of June with the major indexes plunging to their lowest levels since last summer. The weak ADP report was the main culprit and forced economists to hastily revise their payroll growth estimates.

Other economic reports lacked positives and combined forces by leaving the market in the dust, as I posted on Tuesday. Usually, a sharp sell-off is followed by a bounce, but that did not happen, very likely in anticipation of Friday’s uncertain jobs report.

While the markets held fairly steady on Thursday, a rebound never materialized. Today’s jobs numbers showed that the economy has hit “a brick wall,” as one analyst put it. In light of the fact that only 54,000 new jobs were created, and the unemployment rate inched up to 9.1%, it was no surprise to see the major indexes head straight down at the opening.

Rally attempts were rebuffed in the end, and the S&P 500 closed down 2.5% in his holiday shortened week. Technically speaking, some damage was done as the S&P broke through its 50-day moving average and a key support level at 1,310. For the time being, at least the psychologically important 1,300 level held – but barely.

Opinions abound as to how much of an economic slowdown we can expect and if further weakness is in the cards. No one knows of course, but the markets certainly will adjust to a life with less growth. That means any further disappointments with upcoming economic reports are likely to be reflected in softer stock prices or, depending on the severity, a total trend reversal. Any more stress from the European debt crisis will very likely accelerate this process.

While our Trend Tracking Indexes (TTIs) remain in bullish territory, they have moved closer to their long-term trend lines as today’s numbers show:

Domestic TTTI: +3.46% (last week +4.47%)

International TTI: +1.67% (last week +2.38%)

None of next week’s economic reports due out will have the same impact as today’s jobs report. The markets should be able to find some footing, as long as outside events, such as the European debt soap opera, are not exerting too much undue influence on the domestic scene.

Again, this is the time to watch your trailing sell stops and execute them, if you do your own investing. Don’t take any chances by hoping that a major trend reversal can’t happen. It most certainly can; history has shown us that it pays to be prepared.



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Until next week.


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Ulli G. Niemann

Registered Investment Advisor




About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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