Keep in mind the number 1600. Usually, the number means little in our everyday world, but in the market world, the number is looming huge. It is, as many chart watchers describe, a “line in the sand” for the S&P 500. If that number is breached and the index then holds below that line for a few days, those who follow the charts, and those are many, will probably start running for the hills. The correction will be upon us in full force.
Frankly, I did not expect the downward movement to get this far, but it has. It just goes to show how irrationality can completely take over the mind, even the mind of the market. Anyway, it is what is and this brings us to the question of the day.
- The price action of the past two and one-half weeks makes it clear that stocks have entered a correctional phase of some sort. The next logical question, of course, becomes how low will the pullback go?
As I said on Monday, tomorrow’s jobs report for the month of May will define this week and maybe beyond. How, exactly, I don’t know because the market has been irrational for about two weeks. It could sink if the jobs reports is good or exceptional and it could rise if the jobs report is good or exceptional. The reason for the two contrary possibilities is the dichotomous nature of the “to taper or not to taper” message from the breathless media.
Today’s market is showing signs of waiting for that number with cautious buying in the early part of the day. The bulls have to be lying in wait after yesterday’s rout. Oh, they are there, but they too wonder about breaching the 1600 level on the S&P. Caution is the mindset now.
So, let us wait for tomorrow’s report to see what we see about the true mindset of the market. In the meantime, I will cut out early today, but I will leave you with two pieces of data about the current state of economic affairs in the US.
- Challenger, Gray and Christmas reported that planned job cuts totaled 36,400 in the month of May. The May level is down 1,700 from April’s level and down 41% from the year-ago level.
- Major retail chains including Costco Wholesale Corp (COST.O) and Victoria’s Secret on Thursday reported sales increases for May that were generally in line with Wall Street’s expectations, suggesting consumer spending continues to improve moderately.
Trade in the day; Invest in your life …
