Stocks Have their Best Week of 2012

Stocks had their best week in almost 6 months as the S&P 500 finished at 1,325.  Entering the week, the markets were the most technically oversold since last October, 2011.  Therefore, an oversold rally was to be expected at anytime.

 

(Click on Image of Chart for a Bigger Picture)

 

 

 

The Primary catalyst for this weeks rally was:

  1. The Oversold Markets and Investors Surveys at their most bearish levels in almost a year.
  2. News of a Chinese Interest Rate cut.
  3. News of a 100 Billion injection into the ailing Spanish Banking system.
  4. USA ISM non-manufacturing  report that was higher than expected and still in expansion territory (though on further examination the employment component came in lower than expected at 50.7)

Gold after showing remarkable strength for the past two weeks gave back $35 dollars of it’s recent gains as Fed Chairman Bernanke indicated to congress that he sees no need for stimulus at this time.  Gold closed the week at $1,595.

Taking a closer look under the hood of the S&P 500 performance last week we examined the performance of each of the nine sectors that make up the S&P 500.

Below is 5 Day Chart of the nine sectors of the S&P 500 – all nine sectors finished positive for the week with the Financial sector and the Materials sectors recording the highest gains for the week.

 

(Click on Image of Chart for a Bigger Picture)

 

 

Now whether last week rally was the start of a new upward trend or an oversold, short covering rally of course remains to be seen.  We would like to remind readers that the sharpest market rally’s occurs when the markets are in a downtrend.

We think that after a 60 point bounce off of the recent bottom that Investors should remain cautious for the near term.  We would expect the market to have difficulties getting past the 1,340 – 1,355 zone in the near term.  Better opportunities for putting fresh money to work should emerge over the next few weeks.

 

 

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