Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
On Wednesday, the S&P 500 rallied hard in the last 20 minutes to finish right near the flat line, but it still closed with a fractional loss, which makes it the fifth straight loss since last week’s Independence Day patriotic rally. It is now testing technical support at a level of prior-resistance-turned-support. Nevertheless, on balance, investors appear to be getting more and more cautiously optimistic, which might open the door for the bulls.
The Energy sector was the market leader for the day on Wednesday, as crude oil strengthened, while Technology and Industrial were notably weak. For the first three days of the week, Telecommunications has been quite strong, while Basic Materials has been quite weak.
To be sure, the bears are prowling. Nouriel Roubini (aka, “Dr. Doom”) was back in the news with a wet blanket saying that his “perfect storm” forecast for 2013 is unfolding as he predicted back in May, driven by slowing growth in the U.S., China and emerging markets, intractable debt problems in Europe, and costly military conflict in Iran.
And then there was David Rosenberg, chief economist for Gluskin Sheff, opining that the U.S. economy is in the midst of a depression rather than merely a double-dip recession as we keep hearing. He believes that governmental intervention has only served to prolong the economic malaise rather than allowing it to flush out with a quick but painful cleansing, and he predicts another three years before the economy recovers.
Yes, anxious investors have been facing a wall of worry. On top of all of the above, there’s persistent unemployment coupled with lower labor participation rates, an uninspiring start to earnings season, Wall Street’s continuing reduction in earnings growth forecasts, collapsing commodity prices, a depressed housing market, the Arab Spring and troubles in Syria and Egypt, uncertainty over Obamacare and the presidential election, the threat of tax hikes, and global flight-to-safety producing record-low U.S. Treasury yields. And yet stocks are holding up.
Germany boasts the strongest and most productive economy in the EU, but the financial burdens it must assume to prop up the others could prove to be too much. However, for the moment, things are looking more hopeful as central banks around the world have stepped up cooperatively and proactively by bailing out troubled banks and cutting interest rates.
On that subject,…
