The S&P500 has begun a corrective pullback in the market. We will be observing if it leads to further follow through or if the “buy on dip” traders will come in at the current levels. The S&P has finished a symmetrical measured move to the 1700.00 level, so this is an area where it would be very natural to see a full corrective pattern develop. We just need further evidence that a meaningful correction is underway. If you are concerned, this is a healthy level to be taking some profits off the table and raise some cash.
The S&P500 has stalled and consolidated in an 8 point range over the last several days with little follow through above the 1700.00 level. Interestingly there is little news on this weeks schedule to be the catalyst for the next big move.
This week will be a roller coaster ride as a barrage of U.S. economic numbers roll out. The S&P closed lower today with no technical damage done perhaps as a result of a slip in pending home sales. Consumer Confidence numbers are due out tomorrow however we can expect that stocks, bonds and currencies will be range bound until the FOMC meeting. If Bernanke's testimony continues to be a repeat of his past song and dance without any negative interpretation by the markets we suspect more range bound activity into the monthly jobs numbers on Friday. With earnings season still in full swing individual stocks with numbers out this week will certainly march to the beat of their own drums, however all things considered the general stock market will remain overbought and trending higher until the "other shoe drops" and surprises traders and investors into a round of profit taking. Check out our weekly market forecast for our outlook on important support and resistance levels and possible turning points for U.S. and Canadian stocks, the bond market, currencies and commodities such as precious metals and oil. This market outlook is a great tool whether you are an experienced investor or would like begin to learn to trade the markets.
Canadian and U.S. investors have been enjoying a bullish ride as both stock markets have discounted any underlying concerns and continued the uptrend. Most notably the Toronto market has staged a neck wrenching snap back led largely by Canadian banks. Of notable importance is the rally in oil which has yet to look back. Precious metals have also finally come off of their lows. While the primary trend remains down, golds break above 1300 is offering gold bugs a glimmer of hope. We suspect a retracement higher after such a substantial sell off however there are several resistance levels in place that will hold the bulls back. Bonds continue to drift higher, but are subject to headline risks as are the precious metals. For important insight into key support and resistance levels and possible turning points, watch this weeks Market Forecast:
Last week was challenging as traders and investors waited to see what the Feds in the U.S. and the ECB in Europe had to say about the state of the markets and their open market operations. While the Feds stayed the course, the ECB lowered interest rates slightly in an attempt to stimulate the European economy. While this move sent the U.S. Dollar higher the stock market was relatively unimpressed...until the monthly jobs numbers on Friday. The surprise numbers suggested that the economy improved in April and more jobs were created. This resulted in a substantial swing to the upside for the various U.S. stock exchanges. Even the Canadian stock market has been retracing to the upside as resource and bank stocks have shown some resilience as of late. It should be noted that the TSX/S&P Composite is still off it's highs and hitting a strong resistance. As for the forecast for stocks in the U.S., the question is whether the move was partially a result of a short squeeze in which case that reflects more of a fake out instead of a buy signal. One could use the simultaneous sell of in bonds as a possible indication of a flight to riskier assets however, the question remains how much of the sell off was a result of short term bond traders locking in profits, cutting losses or decreasing position sizes to reduce risk? So it remains to be seen whether the smart money will use this latest rally to "sell in May and go away" or if there is something real here. For a more in depth overview of our expectations for stocks, commodities, currencies and bonds watch our short video an feel free to give us your thoughts below. BE SURE TO CLICK "READ MORE" TO ACCESS THE VIDEO