Tuesday, 29 May 2012

Will the market Crash in June like in May?

Dear Friends,

It has not been a good May so far. Dow Jones has been declining in 15 out of 19 sessions in May, dropping a total of 760 points. STI has also declined 180 points so far in May. The market has been right on the "Sell in May and Go Away" cliche.

Apart from Europe problems and the disastrous Jobs reports in US, I think US companies' miss in fundamental Earnings Expectations probably escalated the fall.

Influential companies like Cisco, Priceline, Herbalife and Starbucks who are leaders in their respective industries have missed their Earnings Whispers number. (Earnings Whispers are earnings numbers that Wall Street traders think the companies might have. It is sometimes more accurate than analyst's figures). The shortfall in these industrial leaders caused the whole industry to fall.

The most important thing is, Will this fall continue in June, a month where the it is jam-packed with lots of soccer games in Euro 2012 starting from 8th June. Somehow I feel it might be good news as a lot of European traders and media shift their mindset off their country's economical problems. They will be busy cheering Ronaldo or Rooney instead of panicking.

I suggest we should all focus on this Friday's US Economical Reports. It would drive the direction of the month. Last month we predicted a shortfall in Non-farm payroll report which we got it right. For this month, our forecast is that the Jobs report this month won't be as bad as in April or May. From our research, we think that there is a good chance the Jobs report will be in-line or better than expectations.

Our concern would be the manufacturing ISM report. Looking at the Chicago PMI report on Thursday would provide a glimpse of the ISM report. I am not certain if Enterprises would drive up production in this Summer Holiday season.

Let us just pay attention to this Friday to know the actual market reactions. If Friday proves to be an up day, it might probably suggest a rebound up in the market in June. If Friday drops, it might mean a volatile month again.

I do believe that further downside risk has been limited. Judging by the last week, we can see that the slide has slowed. It has started on a 100-point up day in Dow Jones last week.

Let us see if it is Bottom Fishing time! Keep a lookout at our analysis after Friday's results.

Regards
Daniel

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