1:00pm (EST)
Sell in May and go away…
Those words were worth their weight in gold (pun intended) as the market ended the month of May with its worst performance in 70 years. After a yearlong rally, the bulls were finally challenged by the bears who may have been resting for bigger and worse things.
The euro has been the market’s darkest cloud for over a month now but there are other headwinds getting stronger that could help erase some or most of the hard work the bulls have put in since March 2009.
On Friday, Fitch Ratings was the latest jester to downgrade Spain’s debt after cutting the country’s default ratings to “AA+” from “AAA”. Many of you know how we feel about these “rating agencies” and all it did was help the bear’s case as the major indexes fell 1% on average after news.
Both Fitch and Moody’s (MCO, $20.50, down $0.38) seem lost and late to the party (as they have been for years) and the slash on Spain’s debt rating still doesn’t look “AA+” worthy. Seriously, with an unemployment rate among the highest in the world and a ton of debt, does Spain really look like an “AA+” place to be?
As a result, the Dow finished Friday with a loss of 122 points, or 1.2%, and settled at 10,136. For the week, the index lost 57 points, or 0.6%, and for the month it lost a whopping 872 points, or 7.9%. On Wednesday, the Dow closed below 10,000 for the first time since February and only the 2nd time this year.
The S&P 500 slipped 14 points, or 1.2%, to close at 1,089 after touching a low of 1,084 on Friday. The index actually gained nearly 2 points, or 0.2%, for the week, but managed to lose nearly 100 points, or 8.2%, in May and kissed 1,040 in the process.
The Nasdaq fell 21 points, or 0.9%, on the last trading day in May and closed at 2,257. The Tech-heavy index finished the week with a gain of 28 points, or 1.3%, but got crushed for a 204 point loss, or 8.3%, for the month.
Our instincts were right last week when we penciled in a move for the Dow to drop below 10,000. Although we didn’t close the week there, we still believe the index is headed for trouble. The Dow traded to a low of 9,756 and we said 9,800 would come into play if we fell below 10,000.
This is still the first wave of support but Dow 9,000 could be here by the end of June or July. To the upside, the Dow could test 10,400-10,500 on good euro news or other positive catalysts but we would use that strength to go short again.
For the S&P 500, we said to watch the 1,075 level as the first breaking point and then a possible test to the 1,000 level. We saw the index close right below 1,075, Monday through Wednesday, and on Thursday’s breakout we said to watch for a close of 1,100. The index closed at 1,103 that day and there is a chance for a rally up to 1,150 but we don’t see it. We said if 1,050 is broken, look out below.
The Nasdaq stayed right at that 2,200 level we were targeting until Thursday’s big pop up to 2,278 but 2,000 or below is on the radar. A rally to 2,300-2,400 would depend on the bulls but Tech will correct the hardest of the major indexes. The Nasdaq traded to a low of 2,140 last week.
Gold gained nearly 3%, or $32 an ounce, this month and closed at $1,212 on Friday. The yellow-metal is near all-time highs and is a good safety net for those that are nervous right now but sooner or later we think gold stalls. It’s hard to ignore gold’s historical rise over the decades but demand is actually down because of the high prices. Production levels of gold are pretty much the same and the trade appears to be getting crowded.
There are a number of events that will move the market this week with Tuesday’s April construction spending kicking things off. On Wednesday, the Auto companies will report May sales figures and on Thursday the Retailers will fill us in on same-store sales numbers.
The biggest of the bunch comes Friday when Wall Street gets another look at the unemployment numbers. The figure everyone wants to see is 9.8% which is a teardrop lower than the 9.9% print in April.
The water cooler talk is the economy added nearly 500,000 jobs for the month and the number of unemployed filing new claims benefits did fell last week. However, seeing is believing and a print of 10% would be devastating for the bulls.
We would like to see the market open with a little pop on Tuesday so that we can get into some put option trades that we have on our Watch List. There is a chance we can get you into 3 new trades on Tuesday and Wednesday as the bulls attempt to grab momentum. However, after one last rally cry, we see the market going south again.
We will be back in the morning with a fresh outlook and a list of the companies reporting earnings over the next few days but before we go, remember what we said last week after we closed 13 out of 15 winning trades since mid-April…
Buy when you are scared to death; sell when you are tickled to death…
This is what it feels like to buy put options when the market having a good day and a reminder for those of you who just joined us. We will see you in the morning and get ready to do some trading this week!
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MomentumOptionsTrading.com Weekly Wrap for 5/31/10
Monday, May 31st, 2010
1:00pm (EST)
Sell in May and go away…
Those words were worth their weight in gold (pun intended) as the market ended the month of May with its worst performance in 70 years. After a yearlong rally, the bulls were finally challenged by the bears who may have been resting for bigger and worse things.
The euro has been the market’s darkest cloud for over a month now but there are other headwinds getting stronger that could help erase some or most of the hard work the bulls have put in since March 2009.
On Friday, Fitch Ratings was the latest jester to downgrade Spain’s debt after cutting the country’s default ratings to “AA+” from “AAA”. Many of you know how we feel about these “rating agencies” and all it did was help the bear’s case as the major indexes fell 1% on average after news.
Both Fitch and Moody’s (MCO, $20.50, down $0.38) seem lost and late to the party (as they have been for years) and the slash on Spain’s debt rating still doesn’t look “AA+” worthy. Seriously, with an unemployment rate among the highest in the world and a ton of debt, does Spain really look like an “AA+” place to be?
As a result, the Dow finished Friday with a loss of 122 points, or 1.2%, and settled at 10,136. For the week, the index lost 57 points, or 0.6%, and for the month it lost a whopping 872 points, or 7.9%. On Wednesday, the Dow closed below 10,000 for the first time since February and only the 2nd time this year.
The S&P 500 slipped 14 points, or 1.2%, to close at 1,089 after touching a low of 1,084 on Friday. The index actually gained nearly 2 points, or 0.2%, for the week, but managed to lose nearly 100 points, or 8.2%, in May and kissed 1,040 in the process.
The Nasdaq fell 21 points, or 0.9%, on the last trading day in May and closed at 2,257. The Tech-heavy index finished the week with a gain of 28 points, or 1.3%, but got crushed for a 204 point loss, or 8.3%, for the month.
Our instincts were right last week when we penciled in a move for the Dow to drop below 10,000. Although we didn’t close the week there, we still believe the index is headed for trouble. The Dow traded to a low of 9,756 and we said 9,800 would come into play if we fell below 10,000.
This is still the first wave of support but Dow 9,000 could be here by the end of June or July. To the upside, the Dow could test 10,400-10,500 on good euro news or other positive catalysts but we would use that strength to go short again.
For the S&P 500, we said to watch the 1,075 level as the first breaking point and then a possible test to the 1,000 level. We saw the index close right below 1,075, Monday through Wednesday, and on Thursday’s breakout we said to watch for a close of 1,100. The index closed at 1,103 that day and there is a chance for a rally up to 1,150 but we don’t see it. We said if 1,050 is broken, look out below.
The Nasdaq stayed right at that 2,200 level we were targeting until Thursday’s big pop up to 2,278 but 2,000 or below is on the radar. A rally to 2,300-2,400 would depend on the bulls but Tech will correct the hardest of the major indexes. The Nasdaq traded to a low of 2,140 last week.
Gold gained nearly 3%, or $32 an ounce, this month and closed at $1,212 on Friday. The yellow-metal is near all-time highs and is a good safety net for those that are nervous right now but sooner or later we think gold stalls. It’s hard to ignore gold’s historical rise over the decades but demand is actually down because of the high prices. Production levels of gold are pretty much the same and the trade appears to be getting crowded.
There are a number of events that will move the market this week with Tuesday’s April construction spending kicking things off. On Wednesday, the Auto companies will report May sales figures and on Thursday the Retailers will fill us in on same-store sales numbers.
The biggest of the bunch comes Friday when Wall Street gets another look at the unemployment numbers. The figure everyone wants to see is 9.8% which is a teardrop lower than the 9.9% print in April.
The water cooler talk is the economy added nearly 500,000 jobs for the month and the number of unemployed filing new claims benefits did fell last week. However, seeing is believing and a print of 10% would be devastating for the bulls.
We would like to see the market open with a little pop on Tuesday so that we can get into some put option trades that we have on our Watch List. There is a chance we can get you into 3 new trades on Tuesday and Wednesday as the bulls attempt to grab momentum. However, after one last rally cry, we see the market going south again.
We will be back in the morning with a fresh outlook and a list of the companies reporting earnings over the next few days but before we go, remember what we said last week after we closed 13 out of 15 winning trades since mid-April…
Buy when you are scared to death; sell when you are tickled to death…
This is what it feels like to buy put options when the market having a good day and a reminder for those of you who just joined us. We will see you in the morning and get ready to do some trading this week!
Tags: economic weekly news, Fitch, Gold, Moody's, option picks, option signals, options alerts, stock options trading
Posted in Economic News, Market Analysis, Market Commentary, Weekly Wrap | Comments Off