A DISCOURAGING SESSION FOR THE BULLS
If you had waited until the end of the trading session to see what the equity markets did today you’d likely assume that it was an uneventful session. But nothing could be farther from the truth. Stocks opened 2% higher this morning on the back of very strong performances in Asia and other overseas markets. China’s Shanghai Composite closed almost 2% higher and Germany’s DAX finished over 2% higher after the RBA kept rates unchanged and calmed some fears over the spreading global slowdown. The euphoria was dampened in the USA when the ISM Services report came in below expectations. Econoday details the bad news:
“Peak growth may have already come and gone, a worry of the global markets and indicated by the ISM’s June report on non-manufacturing. The headline composite index slipped back 1.6 points to 53.8 for its lowest reading since February. Nearly all details indicate a slower rate of growth in June than in May. New orders fell nearly three points to 54.4 for its lowest reading of the year and joining the ISM’s manufacturing index for new orders which, in data released last week, is also at its lowest of the year.
Business activity, at 58.1, is at its lowest level since February. Employment edged back to 49.7 ending its one-month visit over breakeven 50. Backlogs slowed slightly, export orders contracted, imports contracted, inventory gains slowed, and even prices slowed.
Today’s report is not good news for the stock market which may continue to discount economic slowing for the months ahead. Today’s report will also increase talk that new rounds of government stimulus may be in order.”
The S&P ultimately closed the session 0.55% higher, but well off its highs of the day.
The utter lack of volume on the downside “bearish reversal” told you everything you needed to know: Barton Biggs and the rest of his “mark-to-market” cohort were done selling, and the market had nowhere to go but up- as it invariably does when all the sellers have been cleaned up…