A Tough Week
26th May 2008
Any way you slice it, this was not a good week for the stock markets. While record high prices in oil started the equity market tail spin, it was the news from the minutes of the last FOMC meeting that really knocked this market down. The FED now seems to be more concerned with inflation than with the stability of the financial markets.
After touching its highest level since the first week of the year at its 200 day MA on Monday, the DJIA blew right through the support of its 50 day MA. The next stop for support will be the April low at 12, 250, but it certainly would not surprise me if the market pays a visit to the March lows of 11, 750.
The SP 500 is not doing quite as bad, since it is still being held up by its 50 day MA. The NASDAQ still has a way to go to reach the support of its 50 day MA. The question stock market traders have to ask themselves: Is the DJIA leading the market down, or will the broader market and technology stocks help the it to reverse course.
The markets were led south by Financials, Real Estate, Consumer Discretionary and Retail. While the former two have been wreaking havoc with the markets for quite some time now, the rough week by the later two seem to be a confirmation that the consumer is feeling the pinch of inflation a lot more than the government has been leading us to believe.
No reason to close out the bear call spreads we suggested earlier this week, unless you have picked up 75% of the potential profit already. In that case, you might want to take your profits and move on to your next trade.
JD