The Past Week: Best Weekly Performance of the Year for Stocks!
The Dow moved back into the black again for 2012!
The Past Week: Best Weekly Performance of the Year for Stocks!
Wall Street has been hit hard by other concerns, including signs of a slowdown in U.S. growth and shrinking demand in China, the world's No. 2 economy.
But some market participants said investors have priced in bad news out of the euro zone – and, unless there is another piece of dramatic news which would create a shock-wave in the marketplace, then there should not be a lot more downside at this time.
Many of the fund managers have basically been expecting bad news since earlier this year, so they have been pretty well hedged to the downside – and now, it's the rally that is scaring people.
Stocks finished the past week with the best weekly performance of the year, amid high volatility.
• The Dow Jones Industrial Average (DJIA) was up 3.6 percent for the week, to 12,554, and
• the Standard & Poor's 500 Index (SPX) gained 3.7 percent to 1325. The SPX fell 6.3 percent in May -- its largest percentage drop since September.
On June 1 the S&P 500 ended below its 200-day moving average for the first time this year, but the index clawed its way back above the key level and rallied later in the week on hopes Europe would find solutions to its problems.
All major S&P sectors finished higher in the past week, led by financials, which gained 4.7 percent.
• The Nasdaq Composite Index (COMP) was up 4 percent at 2858 for the week.
The Dow's 6.2 percent drop and Nasdaq's 7.2 percent loss in May were their largest monthly declines in two years.
However, the Dow moved back into the black again for 2012, ending the week up 2.8%. The S&P 500 is still up 5.4%, with the Nasdaq up 9.7%.
The Markets Ending June 08, 2012
Energy stocks were up 3.9 percent for the week, after oil rose 1 percent for the week to $84.10 per barrel, its first weekly gain in six.
Home Depot (HD) was the Dow winner for the week, jumping 9.2%. Bank stocks were strong.
Citigroup (C) added 9.4%.
JPMorgan Chase (JPM) rose 5.7%.
Even energy stocks were strong, though oil prices were off more than 2%. Anadarko Petroleum (APC) rose 9.8% for the week.
Facebook (FB) had a week that CEO Mark Zuckerberg would rather forget. Shares fell 2.2%, bringing the total decline since it went public at $38 to 28.7%.
Crude oil closed the week higher for the first time in the past six weeks, but was up only just over $1 per barrel. The next major support, from the summer of 2011, sits in the $77 to $78 area.
The SPDR Gold Trust (GLD) saw some early selling Friday, but it closed on a firm note.
While the metal's long-term prospects are still very strong, it is unlikely that gold has bottomed in the near term. Also, a recent sharp rally for one gold miner has left it vulnerable to a correction.
From the May 30 low, gold futures rallied over $110 before peaking on Wednesday. The selling on Thursday supposedly reflected the market’s disappointment that Fed Chairman Ben Bernanke was not more forthcoming on a new stimulus plan.
The drop in gold prices over the past six weeks has caused a few of the long-term bulls to alter their near-term outlook. Some are now allowing for a drop as low as $1,200 before the long-term uptrend resumes.
The weekly charts of the SPDR Gold Trust shows that the December 2011 lows (line b) were tested three times last month. The weekly candle tails (see circle) suggest that the market is well supported below $149.
• This week, GLD reached a high of $159.20, and there is stronger weekly resistance in the $162 to $163.50 area.
• The weekly downtrend (line a) is now in the $166.90 area.
• The weekly on-balance volume (OBV) is still locked in a eight-month trading range (lines c and d). It needs to move above last November’s highs to confirm a new uptrend.
• The monthly OBV (not shown) is still positive for the major trend, and it will turn up with a higher close this month.
• If the support (line b) is violated, there is next support at $144, with the major 38.2% Fibonacci support just above $140.
Treasury Yields in the Past Week
Some of that anxiety faded in the past week. The Treasury market reversed course, with rates rising off of historic lows, set the week earlier when it was the beneficiary of a flight to quality.
The 10-year yield was at 1.64 percent Friday, up from 1.46 percent the previous Friday. There are $66 billion in Treasury auctions in the week ahead, including 10-year notes and 30-year bonds.
The Major ETFs in the Past Week
The major index Exchange-Traded Funds (ETFs) managed to recoup some losses last week, yet still remain within a short-term downtrend. While the week's action was mostly to the upside, for the most part, these ETFs could not climb above last week's high - resistance. Pushing through that resistance level is required if these markets are going to continue to recover. Failure to break resistance, and if certain support levels below are once again tested, these ETFs could see further declines in the coming weeks.
After breaking their 38.2% support levels, the selling in the major averages has not been as heavy as expected. This, combined with the improvement in the market internals, suggests we may not test the 50% retracement support levels.
Europe and Market Sentiment in the Past Week
Market sentiment improved in the past week after news reports pointed to the potential for a bailout for Spain’s banks by euro zone members that would not require harsh new fiscal measures for the country.
In Greece, the New Democracy party has been running close in polls to the leftist party, which opposes the country’s bailout and would reject austerity measures. Since Greece failed to form a government after its May election, markets have become anxious that it will exit the euro zone in a sloppy fashion, spreading contagion across Europe and the international banking system.
Eurozone Economies in the Past Week
There was little in the way of positive news in the Eurozone economies, as the chart of Eurozone retail sales (excluding autos) shows a clear downtrend after topping in 2010. Even the Chinese are worried: the head of their $400 billion sovereign wealth fund is pulling back on Eurozone investments, just in case there is a breakup.
China Cutting Rates in the Past Week
China caught the markets by surprise by cutting rates on Thursday for the first time since December 2008. The initial reaction was quite positive, but with key economic data for May being released over the weekend, some of the Asian markets were worried that it may be a sign that China’s economy is slowing faster than most thought.
This rate cut should have a very positive impact on China’s economic growth, though it may take a few months to manifest itself.