Friends
The markets continue to be sloppy as we approach this holiday weekend. Stocks have had a downward bias in May as economic numbers continue to show a very slow growth environment (if, indeed, you can call it growth at all). The S&P 500, for the time being, is holding some critical support numbers, but the internals have sustained some damage over the past four weeks. We will open the day above the 1325 level, and as we move forward 1295 will be an area of support that we will want to see hold.
Oil continues to hold above $100 per barrel, as our friend Goldman Sachs reversed their call of a couple of weeks ago and declared that oil prices are headed towards $120. Gold continues to hold above $1500 and interest rates on the 10 year treasury continue their march towards 3%.
The talk, as we enter June will be what is the Federal Reserve going to do in the face of a very slow economy. The numbers are not getting any better and QE2 is scheduled to end in a few weeks. Many traders are now contemplating whether the Fed will have to move to a version of QE3 or whatever you want to call it. The fact is, the Fed will have to remain accommodative in the face of these disappointing economic numbers that we continue to receive. They may take the training wheels off the bike at the end of June, but they are going to have to continue to hold on to the bike as we continue this bumpy ride.
Stocks are likely to continue to trade in a somewhat sloppy manner as we enter June. The good news is that this sloppiness creates opportunities and allows us to accumulate names that had either gotten too extended or have just gotten too cheap. We will attempt to do some shopping if June continues May’s decline, but as always we will continue to manage risk if things unravel more rapidly.
In the meantime, have a great Holiday weekend everyone. We’ll deal with the economy and the markets next week.
