Middle May Market Update

Middle May Market Update

Posted on May 11, 2011

Stocks dropped last Thursday along with commodity prices. Friday began with a sharp rally until rumor had it that Greece might leave the Euro zone. The news prompted some late selling. Prices and commodities rose again Monday and Tuesday. Why all the volatility? Clearly, the economy softened in the first quarter. There are still some lingering effects, in the second quarter. Friday's report on new private sector job growth (the best in five years) was far better than expected. The economy should pick up throughout the year as business investment and exports rise. Rising commodity prices have caused a problem for corporations, economies, and of course consumers. Manufacturers have had to pass along the higher prices or see their profit margins suffer. People are cutting back on their driving as gasoline prices moved above $4 a gallon. The current falling commodity prices will help ease concerns about inflation. The result may help keep interest rates low, and that's good news. The major markets continue to be in a long term Bullish trend. Our Canterbury Volatility Indicator is still Bullish on stocks (low), even though most commodities volatility has more than doubled over the last week. Our short term technical indicators are still bullish. There is always the possibility of a short term correction (backing and filling). That said, the primary trend should remain positive unless our indicators turn south.

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