Over the weekend IMF and other world leaders came together to help fund another Greek bailout giving a boost to the futures. However, the news of a possible Greek bailout quickly fizzled after the market digested less than stellar (terrible) economic data. Manufacturing data was the weak spot even as home prices fall more than expected. Case-Shiller report is signaling the housing market has further to go on the downside before recovering. Traders weren’t impressed and brought stocks to their lows of the day with volume running hot. By mid-day it appeared any rally would not work out, but buyers had a different tale to tell by the end of the day. At the close, stocks finished just off their highs with volume coming in hot.
Now the debate will be whether or not today was a follow-through day or not. In our eyes, today was a follow-through day due to price and volume action despite the flood of volume the end of the day. Volume at the end of the day poured in as end of the month as funds shuffle positions around. Even with the shuffling at the end of the month prices gains were solid before and we’ll stick to the market following-through. Remember, stock market trading depends on a prudent disciplined approach. It is uber-important to stick to it.
On the flip side of the coin, June follow-through days often end with big price gains. In 1994 the market was able to follow-through with solid gains in June, but it was the exception not the rule. Seasonality plays a big part here where historically big price runs do not start in May, June, July…but they do begin in late summer. August, September, and October have been known to produce solid market bottoms and kick off big market runs. With that said, we aren’t going to sit back and ignore a rally that could last for a few weeks. We’ll take signals from the leaders we have identified.
This week will be a fun one with the May jobs report capping the week on Friday. Now that McDonalds is not hiring we’ll see if this economy can add jobs. Given the way the economic reports, especially out of manufacturing have been released it is doubtful we have seen jobs added to where Americans can feel better about this economy. Currently, consensus puts the latest job report somewhere around 180,000 jobs. Manufacturing is seen to have added 11,000 jobs. We’ll see how this all pans out. A friendly reminder, the government likes to play games using birth/death rates and a few other tricks. Unemployment, is certainly understated.
Regardless, we are paying attention to how this market acts and how leaders react. Cut your losses short.
