“This week will be an important test for the bulls and next week will be even bigger. The bulls will be looking for a Bernanke bailout but he will not be speaking until Thursday. The FOMC meeting is the following week so he will need to say something positive ahead of this event to stop the bleeding. However, the Fed Beige Book is due out on Wednesday, a day before Ben speaks, and the numbers will need to be good.
While there is a chance Bernanke introduces some kind of new “stimulus” package, the bottom line is that it will involve starting the printing presses once again which does help the financial cliff the U.S. is facing in 2013 but that is another story for another day. This puts the pressure back on Europe to doing something in a hurry but we doubt that happens.
With so much headline risk out there to the downside, the bears could step on the gas, until Thursday which means it will be crucial for the bulls to hold support to start the week. If the Europe news gets worse and Big Ben fails to connect on a Hail Mary pass then the U.S. and global markets will see a continued correction.” (from 6/3/2012 Weekly Wrap/ Monday Morning Outlook)…
The stars lined-up for the bulls as they used a rally to shoot back to the moon and were able to push resistance last week. The situation in Europe didn’t get any better with the world politicians playing a game of cat-and-mouse but Wall Street liked the rhetoric as they work on a solution for Spain and saw the recent weakness as a buying opportunity.
We knew when the bulls held the 200-day MA’s (moving averages) to start the week there could be a chance for a snap-back rally or dead-cat bounce. We said on Tuesday morning after “water-cooler talk of a Fed-ECB bailout to help save the world hit Wall Street desks” there could be a test to the second wave of resistance.
The bulls were able to recoup all of the prior week’s losses and this week should provide some clues on if the rally was for real or if it was a classic bull trap. While some of the headlines have been positive of late, there is still a ton of other noteworthy events that will shape the market for the rest of June and into the summer so it will be important to keep your emotions in check. (read more…)