Stocks have had a rough start this week and today’s economic reports didn’t do much to boost investor confidence. The Commerce Department reported a bleak note on housing, as sales of new single-family homes plummeted 33% in May to tag their lowest level on record. The results were even more depressing than analysts expected, and stocks slumped in response. Meanwhile, the Federal Reserve weighed in with a notably gloomier outlook on the economy. The Federal Open Market Committee (FOMC) voted to maintain record-low interest rates for the 18th consecutive month, and made a depressing tweak to its language — now, the group says the economic recovery is “proceeding,” rather than “strengthening.”
The Standard & Poors 500 chart is still bullish, in that it is above its now-rising 20-day moving average. The breakout of the 1105 level last week paved the way for a quick run to 1130 (on Monday morning, after the hints that China would let the Yuan float). That seemed to exhaust the market, and there was pretty much of a straight downward correction from there (1130) to today’s lows at 1085 — just about exactly where the moving average is. It is mildly disappointing that the 1105 level didn’t become support on the way down, but it is not a complete deal breaker that it has not. However, a close below 1080 would negate the budding bullish trend.
We’ve had three consecutive bearish sessions this week and we think we’re due for a bounce. We expect to get one tomorrow, assuming the jobless and durable numbers are in-line with expectations.
Disclosure: No positions