Can U.S. Market Withstand The Global Gloom?
Thursday, November 15, 2011. 9.25 a.m. The U.S. economic slowdown of the first half of the year continues to show signs of having bottomed and being in recovery. The U.S. stock market seems to agree and has rallied off its October 3 low all the way back to being positive for the year-to-date. But even [...]

Thursday, November 15, 2011. 9.25 a.m.

The U.S. economic slowdown of the first half of the year continues to show signs of having bottomed and being in recovery. The U.S. stock market seems to agree and has rallied off its October 3 low all the way back to being positive for the year-to-date.

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But even as the U.S. economic reports continue to surprise on the positive side, the market’s rally has stalled and day-to-day volatility has returned.

Is it just the short-term overbought condition I warned you about several weeks ago having the market stalled and waiting for the m.a. to catch up? Or is the market about to pull back short-term to test the potential support at the moving average? That would be about a 5% decline for the Dow to about 11,500. Or are the debt problems in Europe and new fears that  Europe is sliding into a recession that will drag the rest  of the world down going to pull even the U.S. market back into a serious correction?

Global markets are skeptical about the ability of the new interim governments in Greece and Italy being able to resolve the problems in those countries.

The yield on Italy’s 10-year bond spiked back up above 7% this morning, the level that spooked markets last Wednesday. And now concerns are moving on to Spain which has seen the yield on its 10-year bonds rise to more than 6% as investors demand more return for the perceived increased risk in Spain’s debt.   

It’s enough to have even the market of Germany, the largest and strongest economy in Europe, looking vulnerable. It remains broken out of its previous sideways trading band to the upside, but stalled out, and even with the potential that a head and shoulders top may be forming on the short-term charts.

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Of course it is the intermediate-term and longer outlook that is important, but still. . .

This Week’s Economic Reports So Far.

In Europe, Germany’s ZEW Economic Sentiment Index declined to minus –55.2 this month from the already dismal minus -48.3 in October.

But it was also reported this morning that Germany’s economy (GDP) grew at an annualized rate of 2.5% in the 3rd quarter, and its 2nd quarter growth was revised up fractionally to 3.0%.

And it was reported that GDP growth in France recovered in the 3rd quarter, rising by 0.4% after a recessionary 0.1% contraction in the 2nd quarter.

And GDP in the 17-nation eurozone grew 0.2% in the 3rd quarter compared to the 2nd quarter, and 1.4% more than the 3rd quarter of last year.

In the U.S., it was reported this morning that inflation at the producer level remains tame. The Producer Price Index fell 0.3% in October, the largest monthly decline in 20 months, and better than the consensus expectation of no change from October. 

And Retail Sales in the U.S. were up 0.5% in October, better than the consensus forecast of a 0.2% increase. And the Fed’s Empire State (NY) Mfg Index moved into positive territory this month after five months in negative territory, rising to +0.6 from minus 8.5 in October.

Buffett Did It Again.

Warren Buffett revealed yesterday that he really likes IBM, which has created the usual hype for a stock after Buffett gives it his blessing.

But once again the media and investors who try to “invest like Warren” don’t seem to realize they are not investing with Buffett but are jumping into a stock after Buffett has already accumulated his stake at lower prices.

Buffett said he began buying IBM shares heavily in March and now has a huge $10.7 billion worth of the stock, or about a 5.4% stake in the company.

Apparently he’d now like investors to pile in and give him an even larger profit on it.

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To read my weekend newspaper column ‘Gold Has Resumed Its Glitter!’ click here!

Subscribers to Street Smart Report: There is a Special Global Markets Report on the Street Smart Report website for you from yesterday, and an in-depth mid-week signals and outlook on the U.S. markets will be there for you tomorrow.

Yesterday in the U.S. Market.

A down day. No follow-through to the rally on Thursday and Friday. But volume was very light, with only 0.7 billion shares traded on the NYSE.

The Dow closed down 74 points, or 0.6%. The S&P 500 closed down 0.9%. The NYSE Composite closed down 1.1%. The Nasdaq closed down .8%. The Nasdaq 100 closed down 0.6%. The Russell 2000 closed down 1.6%. The DJ Transportation Avg. closed down 0.7%. The DJ Utilities Avg closed down 1.3%.

Gold closed down $8.50 an ounce at $1,779.

Oil closed down $0.97 a barrel at $98.07.

The U.S. dollar etf UUP closed up 0.7%.

The U.S. Treasury bond etf TLT closed up 1.6%.

Yesterday in European Markets.

Markets in Europe also closed down some yesterday, no follow-through to the positive response on Thursday and Friday to the resignations in Greece and Italy.. London closed down 0.5%. The German DAX closed down 1.2%. France closed down 1.3%.

Asian Markets Closed Up Sunday Night But Back Down Last Night.

The DJ Asia-Pacific Index closed down 0.9% last night.

Among individual markets:

Australia closed down 0.4%. China closed up 0.1%. Hong Kong closed down 0.8%. India closed down 1.4%. Indonesia closed down 0.5%. Japan closed down 0.7%. Malaysia closed down 0.1%. New Zealand closed up 0.2%. South Korea closed down 0.9%. Singapore closed down 0.7%. Taiwan closed down 0.5%. Thailand closed up 0.1%.

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Markets This Morning.

European markets came well off earlier lows after the positive U.S. economic reports were released this morning, and are now down only fractionally. The London FTSE is down 0.1%. Germany’s DAX is down 0.8%. France’s CAC is down 0.4%.

Oil is up $0.18 a barrel at $98.31.

Gold is up $5 an ounce at $1,783 an ounce.

This morning in the U.S. Market:

This week will be a fairly heavy week for potential market-moving economic reports, including the Consumer Price Index, Retail Sales, New Housing Starts, and the Fed’s Philadelphia area Business Index. To see the schedule of the week’s reports click here, and look at the left side of the page it takes you to.

There were no reports yesterday.

This morning’s reports were that the Producer Price Index fell by 0.3% in October, the largest monthly decline in 20 months, better than forecasts. And Retail Sales rose by 0.5% in October, also better than forecasts. And the NY State Mfg Index rose into positive territory this month after 5 straight months in negative territory, also better than forecasts.

But markets remain focused on Europe’s handling of its debt crisis. Our pre-open indicators are well off earlier lows but still negative.

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being down 45 points or so in the early going.

To read my weekend newspaper column ‘Gold Has Resumed Its Glitter!’ click here!

Subscribers to Street Smart Report: There is a Special Global Markets Report on the Street Smart Report website for you from yesterday, and an in-depth mid-week signals and outlook on the U.S. markets will be there for you tomorrow.

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I’ll be back Thursday morning with the regular Thursday morning post, at 9:25 a.m. (This blog appears every Tuesday, Thursday, and Saturday morning!).

**** End of Today’s post*****

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