(All contect in these articles should be viewed as opinion by our AP's)
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by: Jeannette Rohn Showalter, CFA
May 16th, 2012
What happens with the S&P is very important to investors and to the drivers of the world’s economic growth. The S&P has been declining and certainly seems to face more downward pressure… absent another central bank’s magic of money-out-of-the-hat.
Its importance lies in the fact that many individual and institutional investors use equities as their predominant investment asset. Further, the S& P 500’s price performance is a leading economic indicator ….for market participants, for businesses that are considering spending and for central banks that are devising new machinations to solve the sovereign debt crisis.
As the central banks have been unable to get residential real estate prices to lift in various countries and unemployment to stage a meaningful, believable recovery, they have continued to use equity prices as a mechanism to get the GDP a turnin’… in my opinion.
How so? The wealth effect. People spend out of wealth. People spend when they have more assets from which to spend and equities, not real estate, have staged a huge recovery in value; it is spendable. As the U.S. is the world’s leader in consumer spending (absolute and as a percentage of GDP, north of 65%.), any meaningful drop in the S&P translates into more economic downward pressures. This is the kind of stuff that initiates panic and fear.
As Debbie and Bill have written in their blogs this week (about Greece and China), their insights will not be repeated here except to say that the Bank of China’s recent (and third since November 2011) easing is a pretty darn good sign that China is very concerned. Among other facts, April bank lending was 15% below expectations and expectations have been coming in lower than prior months. (See “China Eases Bank Lending”, Asia Times Online May 18, 2012) China was among the first of the equity markets to begin recovery in 2008 and they were considered the strong man in the room …the one which could spur internal growth and help a global recovery and their banks not (known to be) in disarray. Will they be leading the way down? Or will the central bankers of the world convene and print more money to cover the problems?
Public participation in the stock market has been very light since the collapse in 2008. The public continues to be very risk adverse. In other words, the public has not returned to this market. This and other factors have led to very narrow trading ranges for the S&P 500. Most day trading systems do not perform well in very narrow ranges. A drop in the market is generally associated with expanding ranges, so this market may offer better trading opportunities in the coming weeks. Remember that the Survival Plan, Mini Survival Plan and Condor trade the S&P market from both the long and short side.
S&P Mini Chart
Jeannette Showalter, CFA
Postrock Brokerage LLC DBA,
Worldwide Futures Systems
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
239-571-8896
An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
This is provided for informational purposes only. No statement in this blog should be construed as a recommendation to buy or sell a futures/options contract or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. |
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