Market Week in Review June 30 – July 2

Another rough week for anyone who was long in nearly every major financial asset class – except US Treasuries. The SPX was down another 5%, lost nearly 7% for the month and more than 13% for the quarter. This stock market couldn’t muster a bounce and slouched into the end of Q2. The week’s trading was a particularly frustrating slog, with the heaviest volume coming in the final hour of each session, usually driving share prices down.

Monday was mostly sideways action. Tuesday began with a sharp drop at the open, then ground lower before support held the 1040 level at the close. Wednesday was directionless until another afternoon slide, followed by another little bounce in the final hour, but the day saw new lows for the year. Thursday morning saw more selling pressure, followed by what looked like a positive turn up at the noon hour. To our disappointment, Friday drifted lower in the morning, then higher in the afternoon, with a sudden jump followed by a steep drop – all in the final hour of trading.

There isn’t much positive to say about stocks at this point, other than to note such oddites as the dividend yield on the Dow Industrials exceeding the yield on the 10 year Treasury Note. In the current context, that isn’t really a positive signal. Technically, near term support levels are broken all over the place, and we’re looking at lots of busted charts.

The big winners, again, were Treasuries, but we also had a third week of gains for the euro, which is seeing a counter-trend bounce in spite of continuing ugly news flow from the zone. It could be that the new 3 month ECB facilities have calmed some of the fear in the bank liquidity area, but that may not pacify the markets for very long. I continue to think there are quite a few insolvent banks in Europe, and wait to see how this all comes out. Conversely, the US Dollar, one of 2010’s winners, continues to pull back from what looks like a broad double top in the 89 area.

The losers? Gold futures, oil futures, commodity producers, we already mentioned stock indexes. Even a stalwart market leader like Apple dropped over 7% on the week and broke the 50 day, which has now turned down, on heavy volume. Money flow in Apple shares has turned negative, indicating professional selling. That, my friends, is not a good signal. Need we go on? There isn’t much more to say at this point.

For my trading positions, the best place to be in this market is watching from the sidelines, in the safety of cash. For long term holdings, I have to really consider the big picture here, and right now it doesn’t look very attractive.

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