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The stock market has been very resilient in
the face of writedowns and recently seems to
be fueled by a sense that all is not lost.
Painting a negative economic picture has
been the hobby for several months but pared
back expectations help to bring support to
this market. Several economists and big name
investors have been quick to note that we
might not be out of the woods as far as
recession goes, but it should not be as deep
or dark as feared. As the retail giant
Walmart reports better than expected
earnings, many analysts are hopeful that
next week’s retail sales for April will be
an improvement on last year’s figures from
the same month. Other retail stores are
optimistic and with the stimulus checks
hitting banks, the relief that they may
bring – even temporarily – will help spread
that feeling of optimism.
Nervousness will still send people packing
after every breach of 1400, but with each
dip, traders shopping for a bargain have
picked us back up again. In a spirit of
agreement with the recent Fed policy meeting
and the quarter-point cut that came with it,
investors are still bringing underlying
feelings of bullishness to the markets. As a
leading indicator that the Fed is done with
policy aimed at curbing recession and will
return to a state of neutrality on the
interest rates, the markets have moved ahead
of confirmation. This possible turning point
gives investors a reason to return to the
markets and gives us a bargain entry point
for a long position.
Euro Currency
The US dollar finally began to pick up steam
last week and the euro is starting to show
its weakness. There is still a long way to
go before the ride is over, but here at the
Supreme Council we are ready to be short
this market. Battling historic inflation,
the European Union has posted one of the
worst declines in sales in over a decade and
weakening demand for exports. With the
record high price of the euro against the
dollar it should not be a surprise that
their goods are being passed over. Like the
Bank of England, the European Central Bank
opted to leave their interest rate unchanged
as inflation fears dampen consumer spirits.
Speaking after the decision to leave the
interest rate at 4 percent, the ECB
president focused on curbing inflation and
sustaining growth while economists quickly
suggested that the euro rate will remain
steady through the end of the summer.
Without growth in the export market,
manufacturers in the euro zone will have to
ensure that the local consumer market does
not wilt. Heading into a summer season which
is likely to see record high energy prices,
the slowdown in spending and exporting in
the 15-nation bloc of countries is likely to
keep the selling pressure on this market and
help us pack up more profits.
Disclaimer: Past performance is not
necessarily indicative of future
results. The risk of loss exists in
futures and options trading.
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