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Market Insights

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Market Update

04/26/2012

Just two trading sessions remain in April, a month which began by establishing a nearly 4-year high on April 2 for the S&P 500® Index (SPX) of 1422.38 (Figure 1.1). From the October 4, 2011 trough (1074.77) to the April 2 high, the SPX appreciated a staggering 32.3% (Figure 1.2).
 
Subsequent price action for the month of April can be categorized as a modest healthy correction. Keep in mind this month’s double-bottom lows – 1357.38 on April 10 and 1358.79 on April 23 - have neatly held support (Figure 1.3) above the March 6 low of 1340.03. A disappointing early April U.S. jobs report and rising Spanish bond yields were the catalysts for April profit taking.
 
It is time to look ahead to the first week of May, which will bring some important economic data. In fact, these three reports may set the tone for the entire month of May:
 
•   China PMI – Monday, April 30 @ 9 p.m. EDT 
•   German PMI – Wednesday, May 2 @ 4 a.m. EDT
•   U.S. Labor report – Friday, May 4 @ 8:30 a.m. EDT
 
It seems the current healthy “pause” in appreciation is seeking further guidance on whether the incredibly robust recent earnings will be enough to support a market that is challenged by softening economic data. As the SPX churns within this corrective range, I caution investors not to implement any major portfolio strategy adjustments unless after next week’s important economic data week, the SPX further deteriorates below 1340.03.
 
 
Figure 1.1 SPX – June 2008 to Present

Source: Bloomberg
 
Figure 1.2 SPX – October 2011 to Present

Source: Bloomberg
 
Figure 1.3 SPX – Year to Date

Source: Bloomberg

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