EmailThe failure of the stock market to hold strong early gains yesterday was extremely disappointing. A lower open is indicated this morning. Even the prospect of concerted central bank action around the world to address growth and liquidity has not been enough to significantly improve underlying sentiment.
The S&P 500 was extremely oversold when it closed last week at 1278.08. Short covering helped boost the market with the rallies on Tuesday and Wednesday on expectations of European action to address Spain's banking problems. But even talk of another round of Fed quantitative easing wasn't enough to sustain the rally yesterday. The market has now merely bounced off oversold conditions last week and hasn't really incorporated a more optimistic view of the outlook for the months ahead.
Poor economic data from China, Europe, and the US has legitimately raised concerns that even central bank action will amount to not much more than putting a band aid on a hemorrhage.
The focus is squarely on risks such as Greece leaving the Euro or contagion from a run on Spanish banks. There is little to no talk about the excellent relative value of stocks. Patience and risk avoidance are the dominant themes.
The April trade balance fell to $50.1 billion from $52.6 billion in March. That's good for the US economy, but it will barely get a glance from traders.
The question for today is - how do traders set up ahead of a weekend which might or might not bring European action to address Spain's banking problems? Then, next week, the market will be held hostage to every poll and indication out of Greece as to the possible outcome of the next round of elections on June 17. This might take a while.
Founder and Chairman, Briefing.com
