Reminder: Sabrient is available to chat with Members, comments are found below each post.
Courtesy of Scott Martindale, Senior Managing Director, Sabrient
Utilities and Healthcare are trying to hold up the market this week as Financial, Industrial, Basic Materials, and Technology have led the way down. There appears to be little optimism for the banks, given the worsening housing market and imminent end of QE2 (no more free money). Ciena (CIEN) and SINA (SINA) were big losers in Tech-land today. But it is beaten-down Technology that is rising in Sabrient’s SectorCast rankings.
Oil spiked today by about 2%. U.S. energy expenditures are once again above 9% of GDP, which has not been a good omen in the past. The nuclear disaster in Japan only serves to put more speculative pressure on oil prices as countries now are shying away from nuclear power. And then of course there is the continued economic drag from the resulting recession in such an important economy as Japan.
But it’s not just Japan. Global economic growth remains the big concern, particularly with the disappointing data that has been coming out lately in the U.S. and the credit woes in the EU. FOMC Chairman Bernanke’s speech yesterday was somewhat reassuring, as he and most economists say that the pace of recovery should accelerate in the second half of the year, but his remarks weren’t perceived to be sufficiently optimistic, resulting in the late day selloff. It didn’t help that the World Bank cut its 2011 forecast for global growth.
Last Tuesday, after the Memorial Day holiday, I observed that the bulls appeared to be gathering support and confidence to take the market higher, and indeed we saw a nice breakout to close the month of May on a strongly bullish note and back above all daily moving averages. The “Sell in May” crowd had made little progress. But then Wednesday arrived with bad economic news, and it all fell apart. It’s been downhill ever since.
The chart shows three successive bull flag patterns, each one hitting a progressively higher high. The textbook breakout on May 31 looked quite promising, but the next day brought a big ugly red candle rather than a continued building of the “flagpole.” And since then, June has been dismal, with this week bringing a complete breakdown of support levels. The 200-day moving average is all the way…
