Good day! June is historically a difficult month for the bulls, ending flat or in negative territory approximately 3 times out of 4 and so far this month it's right on track to keep that statistic alive. After barreling into June in free fall mode, the selloff has diminished in pace over the past week, but morning gains have been consistently eroded away by the closing bell. Despite another attempt to recover losses on Tuesday, late-day selling once again took its toll on the markets. This time, Fed Chairman Ben Bernanke added fuel to the fire with comments shortly prior to the closing bell.
Dow Jones Industrial Average (Figure 1)
A number of analysts have been speculating on the Fed's next move given the onslaught of poor data in recent months. The economy is simply not recovering at a pace that offers much comfort to the average U.S. citizen hit with high unemployment and a disastrous housing market that is expected to continue to slip as the year wears on. Bernanke's reminder that QE2 (the $600 billion federal stimulus package) will run out this month and his comments regarding economic stabilization and anticipated growth quickly dashed hopes for further intervention and Tuesday's afternoon selloff quickly gained momentum. The selloff on the 60-minute charts, however, is becoming extreme, so use substantially greater caution on the short side for positions based on time frames greater than 5 minute once we get into Wednesday's session.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day with a loss of 19.15 points, or 0.16%, and closed at 12,070.81 on Tuesday. Fifteen of the Dow's thirty index components posted a gain. The top performers were Intel (INTC) (+1.05%), DuPont (DD) (+0.88%), McDonalds (MCD) (+0.55%), and Alcoa (AA) (+0.51%). The weakest performers were Cisco (CSCO) (-3.00%), Bank of America (BAC) (-1.66%), Hewlett-Packard (HPQ) (-1.08%), and Johnson & Johnson (JNJ) (-0.83%).