We are in for an interesting ride to start the week as futures are pointing a possible sharp decline to kick off the first week of summer. The decline is a result of The World Bank cutting its global economic forecast from -1.7 to -2.9% for the rest of 2009. Although the report says a recovery should start late in 2009, it warns:
Economic damage to developing countries “has been much deeper and broader than previous crises,” and “the expected recovery is projected to be much less vigorous than normal,” the report said. It said banks’ ability to finance investment and consumer spending would be hampered by the overhang of unpaid loans and devalued assets.
In other words, people can’t use their homes and portfolios as ATMs any longer. That extra octane for the consumer and economy is gone for a long time to come.
The Correct Call was waiting on the market’s next move. Although all of our indicators are slightly in the green, we could see clearly that all the indexes had all flattened out. And what makes the flattening even more interesting or worrisome for investors is that it occurred on support levels. That means the next move could be sharp.
Last week we wrote as long as the Dow Jones stays close to 8500 we should be ok. With the Dow closing last week at 8539, we don’t have too much room for error. If the indexes should fall through these levels of support they should find their footing again fairly quickly.
The Dow Jones Industrials should find friends in the 8300 range, the NASDAQ between 1730 and 1750 and the S&P 500 should regain its balance in the 860 to 890 range.
In today’s Correct Call Calendar, our readers will find 2 trading earnings picks and 2 selections for the stock of the week.
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