Market Wrap for the Week Ending May 6, 2011

by: Jon Slotnick

A funny thing happened on the way to Dow 13,000: a significant sell-off on Thursday that at least temporarily halted the markets’ upward trajectory. Even the death of Osama bin Laden at the hands of some intrepid U.S. operatives wasn’t enough to keep the bears at bay. And once again the usual suspects were to blame: euro-debt problems with Greece and a stingy U.S. unemployment rate that simply isn’t getting better. At this point we need our president and the guys and gals on the Hill to introduce some sweeping and forward-thinking New-Deal style legistlation to grow jobs and establish a comprehensive, progressive energy independence policy. Period.

Pre-market futures soared on Monday as news of the long-awaited demise of Bin Laden had market participants worldwide in a jubilant mood. After jumping out of the gate, all three major U.S. markets did a day-long fade, however, closing near the flat-line. Restrained trading prevailed Tuesday, as crude oil prices slid dramatically, in mildly mixed trading, with the U.S. unemployment report on tap prior to the next day session.

On Wednesday, a nasty unemployment report leveled the markets. By the closing bell, the DJIA fell 84 to 12,724. The S&P 500 index shed 9 points to 1,347, and the Nasdaq composite index lost 13 to 2,828. Precious metals and oil prices continued to slide south as well.

The selling gained steam Thursday after the markets had time to fully digest the bleak unemployment report and the specter of a slow-growing U.S. economy. By the end of the day the Dow had sunk an additional 139 points to finish at 12,584. The Nasdaq was down 13.5 to close at 2,814. The S&P 500 finished 12 points lower to close at 1,335. A rise in the dollar crushed gold and silver prices, with the open market price of the yellow ore shedding about $35 an ounce.

Friday’s strong bounce back open lost steam mid-day as all three markets simply fought to hold on to early gains during the second half of the session. We’ll know better next week as to whether today’s rally was a dead cat bounce, or the start of a basing level for more gains to come. But without significant signs of an improving economy, the markets may have hit a short term top. Trading continues to be a bit treacherous as big parabolic gains are being answered with similar bouts of selling. Be careful trading until there’s a definitive change in market sentiment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.