Weekly Wrap-Up
Big T's Takeaways
Friday's May Jobs Report dropped like an atomic bomb on the global financial markets: 69,000 new jobs, vs. expectations of 165,000.
Bad Chicago PMI numbers on Thursday, matched with ever worsening news out of Europe, China, India and Latin America is forcing traders to begin pricing in a global recession.
The yield on the 10 Year Treasury hit a low of 1.44%. That is, to borrow a phrase from an old Cypress Hill song, "insane in the membrane." Remember, Treasury yields are a reflection of expected GDP growth plus inflation. At 1.44%, the bond market is screaming its opinion at us; that opinion is that we will enter a recession, and that inflation is not a factor worth considering.
We closed below the 200-day moving average on the S&P 500, which is bearish. However, we should at the very least have some type of over sold bounce on Monday.
I don't pretend to have a crystal ball, but what I can tell you right now is that US equities are not priced for another recession. Under a recession scenario, the S&P 500 could easily see 950.
The key here is to avoid the "deer in the headlights" syndrome. Assess your current market risk this weekend. Do you have stop losses in place on all of your open trading positions? If not, then I would strongly recommend doing some work this weekend to determine stop loss points for all your short term trades.
This is about living to fight another day, not proving how tough you are. Be sure to make the proper determination between short term trades and long term holds. They are two different animals. I don't sweat my long term blue chips during market declines, because I have a 10 year-plus time horizon on them.
However, my short term trading is a different matter. I always know where I will get out before I get in. If your palms are sweating and you find yourself hoping and praying for a bounce on Monday, then that's all the sign you need that you are taking on too much risk.
Ratchet it back until you are in the "palm-sweat-free" zone, because if we go into free fall and you don't have stops in place, you run the risk of getting engulfed in losses.
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Big T's Takeaways
Friday's May Jobs Report dropped like an atomic bomb on the global financial markets: 69,000 new jobs, vs. expectations of 165,000.
Bad Chicago PMI numbers on Thursday, matched with ever worsening news out of Europe, China, India and Latin America is forcing traders to begin pricing in a global recession.
The yield on the 10 Year Treasury hit a low of 1.44%. That is, to borrow a phrase from an old Cypress Hill song, "insane in the membrane." Remember, Treasury yields are a reflection of expected GDP growth plus inflation. At 1.44%, the bond market is screaming its opinion at us; that opinion is that we will enter a recession, and that inflation is not a factor worth considering.
We closed below the 200-day moving average on the S&P 500, which is bearish. However, we should at the very least have some type of over sold bounce on Monday.
I don't pretend to have a crystal ball, but what I can tell you right now is that US equities are not priced for another recession. Under a recession scenario, the S&P 500 could easily see 950.
The key here is to avoid the "deer in the headlights" syndrome. Assess your current market risk this weekend. Do you have stop losses in place on all of your open trading positions? If not, then I would strongly recommend doing some work this weekend to determine stop loss points for all your short term trades.
This is about living to fight another day, not proving how tough you are. Be sure to make the proper determination between short term trades and long term holds. They are two different animals. I don't sweat my long term blue chips during market declines, because I have a 10 year-plus time horizon on them.
However, my short term trading is a different matter. I always know where I will get out before I get in. If your palms are sweating and you find yourself hoping and praying for a bounce on Monday, then that's all the sign you need that you are taking on too much risk.
Ratchet it back until you are in the "palm-sweat-free" zone, because if we go into free fall and you don't have stops in place, you run the risk of getting engulfed in losses.
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Comments:
FollowTheFacts
6/2/2012 3:43 PM
..it's a good article – all articles are well written and easy to read – including good length. Only thing "surprising" today would be that "these things" come as surprises in the first place – how come? I remember reading some time ago that the shiBob Curtis
6/2/2012 3:32 PM
I think stop losses will make the market go down even further. Buy some puts on your equities.shmoopie12
6/2/2012 5:26 PM
Much of your advice is excellent. A few weeks ago, I took some time to bolster your remarks on inflation, but never received the promised courtesy of a reply.Steve Johnson
6/2/2012 5:39 PM
Do you use stop losses on dividend stocks or simply hold them for the dividend? Appreciate your expertice. Thanks, SJJWALTZINANDOUT
6/3/2012 12:40 PM
KEEP KICKING THE CAN DOWN THE ROAD IT WILL ONLY MAKE THE CRASH DEEPER USA DEBT IS OUT OF CONTROL TAKE YOUR LUMPS TODAY BUY CUTTING SILVER SPOON FED PROGRAMS YES OUTPUT WILL DROP IF THE DEFICITS CONTINUE FORCE THEM TO BE TAX DROPS TO THE CONSUMERRickLBeatty8
6/3/2012 1:15 PM
Thanks for the "Assess your current market risk this weekend", and the similar comments about ratcheting back. It was just what I needed