June 3, 2012
Weekly Market Outlook
By Keith Schneider
To the ridicule of many, Mayor Bloomberg is attempting to make it illegal to sell some super-sized sugary drinks from NY City menus. Personally, it will not affect me as I swore off sodas long ago and moved to Santa Fe. Meanwhile, downtown Manhattan (Wall Street to be specific) took heed instead by saying “no mas” to the punch bowl of short term profits based on high fructose money printing and instead focused on the tepid worldwide recovery.
The Dow Industrials closed down over 2% on Friday and negative for the year. Additionally, May capped off one of the worst performing months for Equities in recent memory, down over 6%. All told the equity markets have retraced over 10% since their highs this year and the worldwide economic news is not good.
The slowing growth in China, India and the US finally got noticed and confirmed here in the U.S with a series of anemic job growth numbers and an uptick in the US unemployment rate. Add into this cauldron Eurozone issues, a looming U.S. fiscal crises, and viola, you have a gourmet recipe for a steep correction.
Technically, the markets are ripe for a pretty big drop as they pierced the 200 day moving average, often viewed as a key long-term trend indicator. If the powers that be join together and inject yet another hefty dose of stimulation along with the plunge protection team, all bets on a further drop are off. However, some bond yields dropped to their lowest levels in history, projecting weak economic growth that points to even lower equity prices. So even if they revive the markets once again with a monetary defibrillator, we are still on a global debt bomb with a long fuse.
To see the global macro view and where the likely support levels sit, watch this week’s video...
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