Where is the Stock Market and the U.S. Economy Heading?

Can Europe contain the fireball of financial contagion that is hopscotching across the Continent?
On My Wall Street Radar

Last week U.S. stock markets suffered significant declines and the fundamental and technical indicators flash significant warnings as we look ahead to December and what is usually the start of the seasonal “Santa Rally.”

US stock market gobbles again with declines in thin holiday trading on bad news from Italy, Spain, Greece and Belgium

Major U.S. indexes declined yet again to end an ugly week with with S&P 500 (NYSEARCA:SPY) declining -0.3%, the Dow Jones Industrials sliding -0.2% and Gold (NYSEARCA:GLD) losing -0.9% as bad news from Europe continues to spook investors.

Italy (NYSEARCA:EWI) conducted a bond auction that yielded miserable results with six month bonds yielding a record high 6.5% and two year yields to more than 8%, levels that are widely regarded as unsustainable.

Stock Traders Almanac has done some fine research in seasonality and their work indicates that the market generates better rates of return from November through April than from May through October. Furthermore, investing in just the six good months of the year has generated better results than the overall return of the major indexes while having been invested for only half the time, thereby reducing your market risk and freeing up your assets to earn interest in low risk money market or Treasury investments.

Chancellor Merkel and President Sarkozy assured the world that “Greece is good” over the weekend, but is it?

Global markets rally hard today on the “promise” of a plan to solve all of the problems surrounding Greece by the end of the month.

No problem, say the two European leaders, and they will do all that is necessary to handle this situation.

This brings to mind a couple of questions.

1. If it’s so easy, why haven’t they done it already?

By the end of October, we will know if global markets managed to avoid a financial train wreck.

Major U.S. Indexes like the S&P 500, (SPY) Dow Jones Industrials (DIA) and Nasdaq 100 (QQQ) face significant jeopardy as the battle to save Greece enters its most dangerous phase yet.  We’ll discuss the macro issues in a moment but first take a look at the technical picture.

October  is the month of Halloween Goblins and stock market crashes, and as we enter this October, the environment is particularly spooky.

lThe 3rd Quarter was a violent one with the Dow Jones Industrials (DIA) giving up 12% and the S&P 500 (SPY) losing 14%, while the NASDAQ (QQQ) shed 13%, the worst quarterly performance since the financial crisis of 2008-2009.

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On My Wall Street Radar