Home > Uncategorized > 2012/05/07: Quick Post: ALERT: Is US equities weakness a trend reversal?

2012/05/07: Quick Post: ALERT: Is US equities weakness a trend reversal?

© 2012 ROHR International, Inc. All International rights reserved.

[Current Calendar and Weekly Report & Event Summary Perspective to be updated later today.]

After initial negative equities reactions to the swing to the Left in Europe settled down, the stock markets are not doing too badly. Even in Europe (with the UK and Ireland Closed for a holiday today) the relative damage is modest. We need to allow that is in the context of European markets that have been trending down for the past month-and-a-half.

Considering how far June S&P 500 future has fallen since shortly after the ECB press conference last Thursday (when it was still in the mid-low 1,390s), it is still only back down to important support. As we had noted in the Rohr-Blog post that morning Weak data, France headed for Socialism, ECB against stimulus… “…fundamental drivers for the markets are possibly headed for another significant disconnect.” And June S&P 500 future foreshadowed that by closing on Thursday below the key 1,390.20 level.

 

While US equities remain in an uptrend since late last year, whether they were ready to extend the rally was critical for June S&P 500 future at 1,390.20 into last Friday’s US Employment. That’s because it was also the pre-Nonfarm Payrolls market Close from last month (on April 5th prior to the Good Friday holiday.) As such, it was very much a psychological level as well as a technical consideration. That said, the major congestion from last year’s trading range into mid-summer was in the mid-1,300 area.

The S&P 500 future weak Close last Thursday back below that level set the stage for sustained weakness in response to the weak US Employment number Friday morning. It was a fairly clear-cut situation that once the market was not getting enough help from the US, the situation in Europe was going to feed its worst expectations. And that is exactly what transpired on the not very surprising return to a Socialist government in France and heavy anti-austerity vote in Greece.

And yet, the question remains what does it really mean to the markets? On current form the equities are not taking it too badly, and there are key areas which need to be watched to see if previously healthier US stock markets are reversing into near-term downtrends. And as on the previous swings, June S&P 500 future will need to hold around 1,355-50 area with a Tolerance to the 1,338 early March low from just before the push above 1,367.

General Market Observations and EXTENDED TREND IMPLICATIONS

Even as bad as the market has performed since last Thursday, unless it posts Closes (including a weekly Close) back below that 1,338 Tolerance of 1,355-50 support it maintains its overall uptrend. And the consideration of just how much worse it might do if it violates that support (along with assessment of the other asset classes) is available in the courtesy access to today’s full institutional Market Alert instead of exploring them in this post. We hope you appreciate the access to the full analysis, and hope you find it useful.

Thanks for your interest.

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