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Not Enough to Overcome Policy Missteps

11/23/2011

On Wednesday morning, November 23, 2011, several domestic economic data points were released. In previous weeks, the U.S. data has surprised to the upside, fostering an appreciative re-pricing in the S&P 500 Index. However, there is not enough “good news” in this morning’s figures to overcome the recent policy missteps on both sides of the Atlantic.  Those missteps, coupled with a complete absence of leadership and confidence, are correcting the S&P 500 Index lower in an uncomfortable fashion. 

  • MBA Mortgage Apps down -1.2% vs. -10.0% last week
  • Durable Goods Orders down 0.7% vs. -0.8% last month
  • Durable Goods Ex Transportation  +0.7% vs. +1.7% last month
  • Cap Goods Orders Nondef Ex Air down -1.8% vs. +2.4% last month
  • Personal Income +0.4% vs. +0.1% last month
  • Personal Spending +0.1% vs. +0.6% last month
  • Initial Jobless Claims 393,000 vs. 390,000 estimate and 388,000 last week
  • Continuing Claims 3,691,000 vs. 3,621,000 estimate and 3,608,000 last week

Technicians point toward “the box” - the 50% to 62% retracement zone that has historically provided support or resistance. Within that context, “the box” for the October 4 1074.77 to October 27 1292.66 rally is between 1158 and 1183.   

MARKET STRATEGY:   Nothing has changed for Investors.  “Defense first” is the optimal strategy with a focus on opportunities in 2012, not 2011.  Corporate bond and energy positioning should remain overweight.   

S&P 500 Index October 4 to October 27

Source: Bloomberg

 

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.