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MV Weather Report: High-Pressure Front Moves In on Market


Rain or shine, we review the day's biggest stock stories.

The market waxed and waned all day before moving lower on the release of the FOMC minutes, which showed that Fed officials are now projecting a deeper recession, with a more sluggish recovery over the next 2 years due to the weakening labor market.

Here's a Buzz & Banter post from Professor Tom Fant on the FOMC Minutes. Click here for the full article.

"The Federal Reserve minutes leave no doubt in my mind that most of its members realize how crucial low rates are to our fragile economy. Higher rates would not only ruin the Fed's credibility, but would also destroy any hope for a recovery.

Make no mistake: If they have to choose between a weaker dollar and lower rates, they have only one way to go. We can argue about the timing and degree of dollar destruction - but you fight the Fed on rates in the near term at your own peril."

The market didn't like this news, and the banks sold off. The downside move was led by Goldman Sachs (GS), Morgan Stanley (MS), Wells Fargo (WFC), and JPMorgan (JPM). There was some strength in certain stocks, however: First Solar (FSLR) ripped higher, as did Mastercard (MA) and Monsanto (MON).

Has Sell in May Day finally arrived? I'm not sure, but I would point readers to a Toddo's comment this morning, "Yesterday marked the one year anniversary of the March 10th-May 19th 2008 bear-market rally. Also, in the 2000-2003 bear market, the first rally failed on May 22 at S&P 1309, 1.7% shy of the 200-day moving average."

Interesting - I guess we should call it sell in late May and go away.

For more on this, here's a Buzz post from Professor Jeff Cooper:

"Yesterday, was the anniversary of May 2008 pre-crash peak. It was also interesting technically for 2 reasons.

"First, the S&P left an N/R 7 Volatility Signal because the range of the session was the narrowest range of the last 7 sessions. I believe it was the narrowest range day since low--if not it was off by a fraction.

"Secondly, The S&P traced out the first Minus One, Plus Two sell signal on the daily chart since the March low. At the same time the Monthly S&P is in the Minus One Plus Two Sell position...just as it was one year ago. And just as it was in May 2001 prior to heading lower into September 2001.

"Right now this
wheel's on fire, but moths didn't know that the light was a flame until it's too late."

Click to enlarge

Click to enlarge

Tomorrow will be an important day for traders. The market looks as if it's poised to trade down to its 20-DMA. The bears will need help from the Philadelphia Fed report and the Leading Indicators, both due out at 10:30 a.m.

All right, Minyans - have a great night!
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