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Wednesday, August 3, 2011

Today's Stock Report

My S&P 500 bounce expectation from yesterday looked pretty forlorn this morning.  But after sinking another 20 points (1.6%) to 1,234.56, bounce it did to 1260.34, within a point of the high for the day.  This is also right in the range of the former support band.  While this could be support reasserting itself, it's also true that yesterday's support becomes tomorrow's resistance.

Yahoo Finance provides technical indicators for intra-day data, and momentum, as measured by MACD (26,12,9 -- I suppose these are in minutes,) peaked before 2:00 pm, and languished for the final two hours.

Despite the positive finish on the day, short term momentum indicators crashed through zero (actually yesterday, and continued falling today) for the first time since climbing from the mid-June lows.  Longer term indicators turned down more sharply. They have not touched zero this year, but are now on their way.   The mid-day rally is not the sign of a market recovery.

In this morning's e-mail from Zach's, Steve Reitmeister states he has gone to 0% long stock exposure, citing these reasons.

Simply, the economic data is not good. The final straw for me was the hefty negative revisions to GDP plus an ISM Manufacturing survey that is teetering on a negative reading. This now has me contemplating a 50% likelihood for a recession on the horizon. That leaves 50% likelihood of Muddle Through Growth which would provide modest gains for stocks going forward. The problem is that far too many investors were expecting better than Muddle Through Growth for the 2nd half of the year. As those investors ratchet down their expectations, they will also decrease their risk appetite for stocks.

The DJI finished up 29.82 today at 11,896.44.  Barring a big turn-around in economic data, Reitmeister sees the DJI down to 11,000, and possibly far lower.

Hang on to your hats.

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