March 3, 2013
Weekly Market Outlook
By Keith Schneider
US Stock Market history was made this week when the Dow dropped 216 points on Monday, a one day decline that engulfed the range of the prior twenty trading days. Unless the market tanks soon on the heels of the Sequester, which was signed into law by President Obama late Friday, it will be just an interesting footnote. The market recovered and the Dow actually closed on new highs. This wacky price action shows just how brittle this market really is. It was mostly induced by the elections in Italy, where a 76 year old scandal plagued media tycoon and three time former Prime Minister, Silvio Berlusconi, was re-elected to head his party causing a political stalemate and casting doubt on the viability of the EU. Famous for hosting "Bunga Bunga" parties and cornering the Viagra market, he topped those acts with his recent engagement to a 27 year old bombshell (not to mention his ongoing corruption trials, associating with underage prostitutes, or the fact that he is still married). The Italian Political landscape makes our Capital Hill look downright enlightened. In fact, a comedian who heads another populist political party that is against the austerity plan reviled by most Italians is a critical power broker, Beppe Grillo. He will highly influence if not decide who will be next Prime Minister of Italy and what happens to the Euro as well. What is good for Berlusconi is not good for Italy as its stock market dropped 10% from this week and clearly needs a dose of whatever Silvio is having.
Italians are enduring a particularly hard time, with rudderless political leadership during a crisis and without the Pope to turn to for spiritual support.
Move over Verdi- make way for a 21st century Opera!
What is also noteworthy is Gold down over 5% in February, in line with a stronger dollar while Interest rates nudged lower, pointing to a shifting macro landscape. Lower rates should have boosted bullion prices. Bernanke also made a similar point this week regarding firmer rates, an improving economy and a stronger stock market.
The market internals and sentiment indicators all point to more upside, and seasonally March and April are historically good months for the equity markets. However, the markets short term price pattern trumps all in a brittle environment and if the average American starts to see the effects of the mandatory cuts, the market will also feel its effects. We are still high on the fact that we got thru the debt ceiling crisis, so why not this one? Check out this week's video as the tape tells all.
Every week you'll gain actionable insight with:
