Saturday, June 23, 2012

Sector Performance Update for the Week of 6/18/2012

After Moody's downgrade of major banks on Thursday after the close, the market basically reacted positively, as we had guessed it would.  XLF, the SPDR financial sector ETF ended Friday up 0.77%.  Of course, the usual dead-cat bounce after the 2.0%+ decline on Thursday was also the driver behind market's closing in the black on Friday.

We remain pessimistic about the economy, which we think will be displayed by the June employment report.  Important upcoming economic indicators were mentioned in the last post we published on Thursday.  Although the market bounced up a bit on Friday, it still closed below the resistance level, 1340, which is the 23.6% Fibonacci retracement.  The 50-day EMA remains above the 10-day, so we are basically at a wait & see mode.  As mentioned onThursday, we're looking at the 1310 level of S&P 500 being the short-term critical level.  If the index goes below that before getting back up to the 1340 level, which will also take the 50-day EMA below the 10-day, then the 1290 support could be at risk again.  Given how much the market moved up in anticipation of Bernanke's helping hand, the 1290 support which we initially thought might be at risk due to a Bernanke disappointment remains intact.  Of course, overall, the market remains fragile while the economic recovery remains questionable.

The sector performance update for this week is provided below.  By the way, we must congratulate the Germans for making it to the semi-finals of the Euro Cup 2012 by basically destroying Greece.  Let's see if Merkel approaches addressing the EZ crisis with the same mentality.  If so, and assuming a very very negative market reaction, then a QE3 announcement at the August FOMC is basically guaranteed.

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