What Next ?
It would have been nice to believe that “Manic” May’s troubles would disappear with a single flip of the calendar page. However the first week of June merely presented us with another slap-in-the-face wake-up call. Thankfully, it was a short work week. Imagine the damage that could have been done with a fifth trading session. After a nearly month-long battle to stay above the 10,000 level, the Dow Jones Industrial Average finally folded on Friday and closed at 9,931.
At the very minimum this past month of selling had prompted the bulls to expect that a relief rally could happen soon. But if the recent bear market taught us anything, it is: don’t fight the market. It will do what it wants to do, and trying to defend your market positions with stats or validation as to why you are right, simply does not matter.
The holiday-shortened week got off to a very shaky start, followed by Wednesday’s and Thursday’s advances which brought a respite for investors. Unfortunately, we now know this simply provided nothing more than a selling opportunity. On Friday, the S&P 500 Index (SPX) posted a 3.4% decline and its lowest close of the year. The only glimmer of hope for the bulls is the fact that 2010’s intraday lows at 1,040 were not penetrated.
Friday morning’s opening saw the SPX sitting right around the key 1,100 century mark and just below its 200-day moving average. First bad news: the euro sold off, as concerns emerged that Hungary faces a fiscal meltdown similar to that of Greece, sending U.S. stock futures lower; then a disappointing jobs number sparked more selling. That was enough to signal another technical failure of the retest of 1,100.
The SPX is still above its February low at 1,045. However, it won’t take much to initiate a push below this all important support level, and create more negative pressure for stocks.
