Wall Street closed in red territory once again as investors found little reason to diverge from a seasonal lull that often follows first-quarter earnings. The “sell in May and go away” adage has some fundamentals behind it, given that markets tend to move higher on economic data and earnings. Following first-quarter earnings reports, stocks face a stretch where there’s not enough consumer spending to make a big difference in economic data, so markets are likely to drift. The Dow Jones Industrial Average closed down 47.38 points at 12,548.37 after trading on either side of the flat line for much of the session. The Nasdaq Composite Index closed down 46.16 points to 2,782.31.
The day’s economic data gave little support. Manufacturing activity in the New York area grew at a slower-than-expected pace in May as the cost of materials rose, with the Federal Reserve Bank of New York reporting that its index of economic activity declined to 11.9 from 21.7 in April. The survey comes as part of a continuing spate of softening economic data. Later data had the National Association of Home Builders reporting its index of builder confidence remained unchanged in May, at 16. We’re holding up on pullbacks because the big picture is very supportive of market values, even though overbought conditions bring us to down days.
Oil futures declined on Tuesday, adding to losses made in the previous session, as the dollar continued to benefit from ongoing concerns about European sovereign debt issues. Light, sweet crude-oil futures declined 22 cents to $97.15 a barrel in Nymex electronic trading on Tuesday. Oil for June delivery closed with a loss of more than $2 a barrel on Monday after the arrest of the head of the International Monetary Fund, Dominique Strauss-Kahn, stoked anxiety about finding a solution to Europe’s sovereign debt woes. Support levels are being violated across the board for commodities and we expect deterioration to escalate today.
Today’s Important Economic Announcements (GMT)
8:30 AM GBP CPI y/y
9:00 AM EUR German ZEW Economic Sentiment
Tentative GBP BOE Inflation Letter
10:00 AM GBP MPC Member Posen Speaks
12:30 PM CAD Foreign Securities Purchases
12:30 PM USD Building Permits
1:15 PM USD Capacity Utilization Rate & Industrial Production m/m
4:30 PM CHF Gov Board Member Jordan Speaks
10:45 PM NZD PPI Input q/q
S&P 500
Yesterday, the S&P 500 Index closed down 8.3 points at 1,329.47 points, with tech and consumer discretionary sectors falling more than 1%. Amazon.com Inc. fell nearly 5%, Yahoo Inc. lost 4.5% and Monster Worldwide slid 8.3%. If there was a real catalyst for fear, money would be coming out of the market, but instead it is being rotated. We’re holding up on pullbacks because the big picture is very supportive of market values, even though overbought conditions bring us to down days. In our opinion, the S&P is headed towards our 1312 target, which may present proper valuation for investors as other ships continue to sink. Traders are encouraged to short sell this CFD.
Stop Loss: 1,335
Take Profit: 1,312
EUR/USD
All eyes on the Euro as the IMF chief was arrested on sexual assault charges, which would weaken the IMF’s ability to resolve the Euro zone debt crisis. On Monday the Euro/Dollar commenced a major recovery, increasing with almost 200 pips. The European currency appreciated from 1.4046 to 1.4244 yesterday, matching the positive Interbank sentiment projection at nearly +9%, closing the day at 1.4155. This morning the pair is moving neutrally and within yesterday’s range for now. Going bellow yesterday’s bottom and first support at 1.4046, however, would confirm continuation of the bearish trend, towards next important objective downwards 1.3928. We still feel the Euro needs to test and break the 1.40 level.
Stop Loss: 1.4236
Take Profit: 1.4045
USD/CAD
Wildfires in northern Alberta prompted some energy and transportation companies to temporarily shut down operations Monday. Fires in and around Slave Lake on Sunday have resulted in the mandatory evacuation of the town after the destruction of hundreds of homes, churches and businesses. Calgary-based Penn West Petroleum said it has shut in 25,000 to 30,000 barrels a day of heavy oil production in north-central Alberta and suspending drilling in the region. Canada’s reliance on the Alberta oil will likely be reflected in the currency market. The CAD is expected to weaken in the next 24 hours as emergency crews are struggling to resume oil production in Alberta. Make sure your take profit is not set too far off.
Stop Loss: 0.9624
Take Profit: 0.9750
Published by www.SolidityBrokers.com
