Bearish-sounding overseas election results look to assist investors to additional “Sell in May” efforts. For the five day period the SP-500 (SPY) is off 2.44% as bulls “go away” after a brief stab at extending a truly strong and completed “Best Six.”
THE WEEKLY NUTSHELL
- “Pre-Sell in May Profit-taking Monday.” Following four straight days of gains and 2.5%, bulls follow-through with a bit of risk reduction to the tune of 0.39%. Imbuing a lightening of portfolios, worse-than-forecast personal spending data and Chicago PMI, as well as an official “R” rating for Spain’s economy prove irritants rather than supportive as last week’s “QE3!” mantra is pushed to the side.
- “May-Day for Bears or Bulls Tuesday?” SP-500 finishes up 0.57% on May Day and breaks bear flag resistance but loses half of its 1.20% intraday gains during second half slump resulting in tail-turning turnaround hangman candlestick. Imbuing bulls in first half, ISM April data rises to stronger-than-expected 10-month high of 54.8 from 53.4 and contrary to estimates for modest dip to 53.0. Assisting, China’s PMI comes in slightly weaker than forecast but 53.3 reading marks 13-month high. Tail-turning assistance from first half near 3% gainer for the iShares Bull ETF (AAPL) which fumbles and tumbles to 0.32% loss in second half. Britain’s PMI drops and ekes out measly expansion of 50.5 suggesting its newly-anointed recession could prove challenging. Construction spending is below views with gain of 0.1% versus 0.5% forecast.
- “Wins-day for Bulls?” Wobbly and mostly under pressure session sees SP-500 reclaim bulk of losses to finish down just 0.24% and narrowly above 1400 level, while Naz’ closes with minor gain. Bearish display out-the-gate courtesy of weaker sneak peak at labor market with ADP showing private payrolls increase of just 119K vs. forecast of 170K. Disappointing Eurozone PMI data led by Germany’s sharp contraction reading of 46.2 and an uptick in the country’s unemployment act as additional drag for stateside bulls. US Dollar (UUP) gaps above 200SMA to confirm two-month double bottom within year-long uptrend on heightened economic worries, but finishes at session lows and gain of 0.32% resting on the moving average.
- “Terri-Bull Thursday.” SP-500 finishes off 0.77% near session and fresh weekly lows back through 1400 on mixed reports in from of BLS jobs data on Friday. Bulls begin Thursday near neutral line helped along by stronger-than-forecast decline in weekly claims to 365K and better-than-feared labor costs and productivity data. Weighing in and eventually forcing bulls to hoof it below technical support, a slightly weaker dip to 53.5 in April ISM Non-Manufacturing data and word of ECB standing pat on rates despite cautioning of economic downside risks to Eurozone. The US Oil Fund (USO) tumbles 2.66% in technical tail-turner on broader data / demand concerns and word OPEC “unhappy with high prices” according to CNBC.com. VIX ($VIX) closes higher by 4% but at 17.50% isn’t exactly rattled with prices squarely neutral historically, as well as short-term with the sentiment gauge sitting on its 10, 30 and 50SMAs.
- “Bears Go To Work Friday.” Weak but not wholly unexpected nonfarm payrolls data increase of 115K vs. 162K forecast sends bulls stampeding 1.62% lower into key challenge of prior May 2011 highs at 1370. Reaction comes also despite upward revisions to both February and March employment data. Non-gravity slice of 2.85% in the iShares Bull ETF (AAPL) assists in broad-based market pressure, as does near 4.0% decline in US Oil Fund (USO) on weakened sentiment storyline, OPEC and word Iranian production is anticipated to increase. Weekend jitters in front of Greek and French elections aids, though “flight movement” is limited with regards to less-than-panicked, but bid VIX ($VIX), Dollar (UUP) and 20-Yr (TLT).
WEEKLY CALENDAR OF KEY UPCOMING EVENTS
Economic: Wildcard Eurozone credit markets spearheaded by bearish-sounding Greek and France election results. Consumer Credit ($11.0B).
Earnings: Cognizant (CTSH), DISH (DISH), HollyFrontier (HFC), AvisBudget (CAR), Tyson (TSN).
After Hours: Andersons (ANDE), Clean Energy Fuels (CLNE), Electronic Arts (EA), Otter Tail (OTTR), Rackspace (RAX), Salix (SLXP), Stone Energy (SGY), Vivus (VVUS), Vornado (VNO).
Earnings: DIRECTV (DTV), Fossil (FOSL), Henry Schein (HSIC), Molson (TAP), Scotts MG (SMG), Tenet (THC), Vitamin Shoppe (VSI), Wendy’s (WEN).
After Hours: Blue Nile (NILE), Chiquita (CQB), EOG (EOG), Kinross (KGC), Medifast (MED), MercadoLibre (MELI), Solera (SLH), URS (URS), Disney (DIS), XL Cap (XL).
Economic: Weekly Crude, MBA Mortgage Index, Wholesale Inventories (0.6%).
Earnings: Agrium (AGU), AOL (AOL), Dean Foods (DF), FTI (FCN), Macy’s (M), Maidenform (MFB), SodaStream (SODA), Teva (TEVA), Tim Horton’s (THI).
After Hours: Activision (ATVI), BMC (BMC), Cisco (CSCO), MEMC (WFR), Monster (MNST), Priceline (PCLN), Tesla (TSLA), Universal Display (PANL), Zhongpin (HOGS).
Economic: Weekly Claims (365K), Continuing Claims (3.28M), Trade Balance, Import / Export, Treasury Budget.
Earnings: ArcelorMittal (MT), Beacon Roof (BECN), Canadian Solar (CSIQ), Dynegy (DYN), Kohl’s (KSS), MakeMyTrip (MMYT), Sony (SNE), BT Group (BT).
After Hours: Black Box (BBOX), CA Tech (CA), Career Ed (CECO), Home Inns (HMIN), McDermott (MDR), Molycorp (MCP), Nuance (NUAN), Sotheby’s (BID), Wynn (WYNN), Nordstrom (JWN).
Economic: PPI & Core (0.0% & 0.2%), Michigan (76.2).
Earnings: NVIDIA (NVDA), ReneSola (SOL), IAMGOLD (IAG).
Figure 1: SP-500 (SPY) Weekly Chart Topping
“Sell in May and go away?” Growth advocates Investor’s Business Daily would approve after a pair of sharp back-to-back sessions of distribution effectively broke a very short-lived bull / uptrend defined by late April’s Apple earnings / BullnankeSpeak QE3 musculature and put the market back into a still-to-be determined, corrective environment. We agree.
In our view, “Worst Six” seasonality dictates being aware of historically challenging conditions still ahead for bulls. Further, with a generous “Best Six” in place, weekly Fib-based butterfly top intact and a failure to hold 1400 constructively within a potential seven week-long cup consolidation; the overall action looks to strongly suggest the icing on the cake or umm, Apple (AAPL), is in place for confirming a lower-high double top and downside risks for bulls.
Last week we cautiously noted the only “up” trend in the market, wasn’t really price, but actually optimistic investor expectation of additional Fed accommodation. That still remains the case, though chatter of such action was seemingly lost on bulls despite more overall weak data punctuated by Friday’s weak jobs report. Due to that wildcard, bears still need to tread lightly, but until proven differently, do receive the benefit of the doubt from a technical standpoint.
- First Week Effect 2012.
- Testing of key 1343 – 1371 support zone.
- Fibonacci based butterfly completion around test of 1400 with triple doji high.
- Failure of Transports (IYT) and small caps (IWM) to confirm rally.
- “Early” Best Six complete from October corrective lows.
- SP-500 lower high double top to confirm Fib-based butterfly completion.
- Lack of fear ($VIX) in last week’s drop in SP-500.
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