By Raghu Gullapalli, contributing writer
As earnings season draws to a close, the market has been consolidating before its next move. With the overall bearish sentiments in the markets around the world and the uncertain economic situation here and in Europe, the U.S markets could be soon to follow.
Uncertainty in the market in the wake of QE2 sees large financial institutions and sophisticated investors repositioning and minimizing risk. The smart money having reduced their holdings in long futures contracts by 13% over the last week. And the increase in margin requirements have driven many speculators out of the commodity markets, forcing commodities and possibly the market downward.
The S&P has been holding above its trendline but with weakness in the world markets, it may break support at 1330 and even may break 1300, confirming a full correction is underway and may head to 1250.
But then again my current bias may prove incorrect, as later in the week the May 2nd highs of 1370 could be broken and the S&P marches back to 1450.
In either case, its important to stay protected . You can do that with SmartStops.
The only sectors, which have shown any leadership or life, have been the utilities (XLU) and healthcare (XLV). Precious metals bounced but then quickly fizzled lending credence to my belief that Silver (SLV) may go down as far as $25 in keeping with its historical 1:60 price ratio with Gold.
A relatively slow week may be alleviated by the retail sector. The retail sector (XRT) has several major players reporting earnings this week. J.C. Penney (JCP), Urban Outfitters (URBN), Gap (GPS), Abercrombie (ANF) and Game Stop (GME) being the most prominent. After reports last week of Macy’s (M) strong first quarter, beating per share estimates by 12 cents and raising guidance for the rest of the year, the retail sector may be the catalyst and leadership the market needs to break out of its doldrums.
As I conclude this article J.C. Penney’s (JCP) have announced earnings and stated a 7% increase in profits in Q1 and has raised its outlook. Smartstops.net has the short term stop at $36.49 and the long-term stop at $35.82