Steep...Slow bleed
Thursday, June 2, 2011 at 07:43AM Despite Monday’s overnight gap exuberance based on Greece bailout reports, we entered the week highlighting … “..be careful chasing the bus as the primary focus this week will likely switch to Global eco’ data (PMI’s) to provide some clarity as to the scope of the economic slowdown”. Well, 48hrs later….today's equity scoreboard sums up the end result of the eco’ data provided so far for the week….SP down 30.65 to 1,314.55, DJIA down 279.65 to 12,290, NASDAQ down 66.11 to 2,769, Russell down 26.90 to 821.
So, yes, it can be concluded Tuesday’s rally was ..”mostly ES driven and probably a function of window dressing as well to close off the worst month since August’10”.
Simply, eco’ data was the downside risk for the market more than in recent months in our view and hence we layed out the schedule for the week. As it turns out, today’s action described by words like carnage, demolished, steep, worst day since August with SPX falling intraday from 1345 to April’s gap 1314 is a function of the data. Any positive bias emerging from previous days Greece news, Japan IP numbers was squashed by Global PMI’s…..China’s, Europe, UK PMI’s , (US ADP tossed in ) followed by US ISM in early market hours.
In all, May channel top once again provided resistance. After twice, including last week’s ‘Footing Zone' in the April gap as a possible level of support and hence bounce oppy’, we can’t say it for a third time for the market. Reason, today’s eco' data will push potential buyers back on their heels as it hits every morning paper. It doesn’t mean all hell is going to break loose, but SP1295-1300 is a likely necessary visitation level in the near future extending the lateral trading range to create capitulation of sorts. A bottom is near, today’s market carnage was a necessity for it to be closer at hand.