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Master Analysis: Stock Markets Tumble



June 01, 2011 – Comments (0)

The markets continued their big drop into the lunch hour with the SPDR S&P 500 ETF (NYSE:SPY) hitting a low of $132.85. This fall was mainly due to panic over the ADP Private Sector Employment numbers which came in sharply lower than estimates. In addition, the ISM Index for May came in at 53.5%. Expectations were for a number upwards of 57%. This just continues the string of negative economic news the markets have received over the past couple months. Investors are seeing a pattern and realizing the economic picture is a lot darker than thought. The sellers are out in force today even with a weaker Dollar. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) $21.31, -0.03 (-0.14%).  Even with the small drop in the U.S. Dollar index, the markets are still sharply lower as they are paying far more attention to economic news. Usually, the markets will move inverse to the Dollar.

Financial stocks are leading the decline with JPMorgan Chase & Co. (NYSE:JPM) trading at $42.03, -1.21 (-2.80%). The banks have been the weakest of late and it is not surprising to see them dropping further today in a down market. The strongest stocks can be found in the technology sector with Apple Inc. (NASDAQ:AAPL) and Google Inc. (NASDAQ:GOOG) both positive on the day.

The markets are near an inflection point. While still trading near their 52 week highs, there seems to be a realization starting that the recovery will not go on forever and things will not return to their 2007 levels. Ultimately there is far more downside in the markets than up and it appears the institutions are starting to unload over the last few weeks.  Play this market on the safe side. Cash may be king for a while as the Dollar has made a bottom in the short term.

Gareth Soloway

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