A Clear Downtrend Has Formed

Thursday, May 26, 2011
Stock Market Commentary:

Stocks and a host of commodities gave back overnight gains and opened lower after GDP and jobless claims missed estimates. So far, the old adage, “Sell in May and Go Away,” appears to be working brilliantly.  From our vantage point, the market rally remains under pressure due to the lackluster action in the major averages and several leading stocks.

GDP & Jobless Claims Disappoint:

Before Thursday’s open, the Commerce Department said Q1 GDP was unrevised at +1.8% which fell short of the Street’s +2.1% estimate and much lower than Q4’s +3.1% rate. The report showed that demand contracted while inventory advanced which is not a healthy equation. In other news, the Labor Department said weekly jobless claims rose +10,000 to 424,000 last week. The report topped estimates by 20,000 and bodes poorly for the fragile jobs market.

Market Outlook- Market In A Correction

From our point of view, the market is in a correction as a new downtrend has formed and the 50 DMA line is broken for many of the major averages.  Since the beginning of May, we have urged caution as the major averages and a host of commodities began selling off. Looking forward, the next level of support is the 9-month upward trendline and the next level of resistance is the 50 DMA line and then the 2011 highs. If you are looking for specific help navigating this market, please contact us for more information.

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