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I receive a weekly market update from a previous work colleague that I would like to share with you. He provides a very nice summary of the week’s market activity that is concise, while providing a great overview of market conditions and trends. Please be sure to read the disclaimer at the bottom of the summary. You can also subscribe to this weekly newsletter if you find it useful.
Market Update – August 19, 2011
In another volatile week, the S&P 500 dropped just under 4.75% from last week’s close to finish the week at 1,123. The Dow lost about 4% on the week to end at 10,817.
July producer and consumer price (PPI and CPI) levels rose slightly more than expected, 0.2% and 0.5%. Housing starts, building permits and existing home sales were down from June and a little worse than expectations. Initial unemployment claims were 408k, roughly within range of the levels we’ve seen over the past several weeks.
The Empire Manufacturing report dropped to -7.70 from last month’s 3.76, disappointing expectations that it would improve. The Philadelphia Fed reported an unexpected -30.7, well below expectations and last month’s 3.2.
Most of the week’s losses came on Thursday after sharp drops in European stock markets which, combined with weak economic data, sent the S&P 500 down about 4.5%. A meeting Tuesday between Germany and France produced no real solutions for the EU debt crisis. With many countries banning such sales, short selling concentrated in the country permitting it, Germany, on Thursday. That action sent German markets sharply lower on the day leaving many major European stock indexes at or near two year lows.
From a technical perspective, the rebound off of last week’s low took the S&P 500 to a daily close of 1,204 on Monday, roughly matching the Fibonacci retracement level of 38.2%. The brief relief rally eased last week’s oversold conditions, setting the stage for Thursday’s sell off. Friday’s close was just above support established last week at 1,120 and may be a promising sign if the level holds. Unfortunately, the daily technical indicators are pointing down with room to move lower suggesting that the bears are not done yet. If the sell off continues, the next level of support looks like it will be around 1,080, below that 1,050. As with last week’s outlook, the market remains susceptible to the headlines and its own fears.
Many investors are concerned that we’re in for a repeat of the 2008 market, with many ready to jump ship. One clear lesson from years of watching this is that moving with the crowd is usually not a good idea. Having a clear, disciplined approach is. If you’d like a sounding board to discuss your personal situation, feel free to call or email me
That’s it for now; please feel free to forward this to friends who may be interested. If they want to subscribe, have them send me an email. If you’d like to unsubscribe from this weekly email, reply to this address with Unsubscribe in the subject line.
Bill Connors, CPA
Vice President
512- 275-0814 direct
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Related articles
- 10 reasons not to panic (business.financialpost.com)
- Market Update: August 2011 (vodiacapital.wordpress.com)
