Stocks, ETFs, Fail At Resistance

U.S. stock markets dropped again on Thursday as the recent rally stalls at resistance and data point to global recession.

After a sharp rally to long term resistance levels, global markets have fallen back from recent highs. Technically, overbought indications are unwinding amid fundamental headwinds.

The global economy continues to slow and Fed President James Bullard dampened the outlook for more quantitative easing coming in the short term.

Markets have been anticipating more monetary easing by the Federal Reserve due to recent comments by Fed Chairman Ben Bernanke and several of his Presidents, but today another President, Mr. Bullard, pushed aside such speculation on the grounds that the economic data had recently improved.

The Dow Jones Industrial Average (NYSEARCA:DIA) fell 0,9%, the S&P 500 (NYSEARCA:SPY) slipped 0.8%, the Nasdaq Composite (NYSEARCA:QQQ) declined 0.7% and the Russell 2000 (NYSEARCA:IWM) slipped 0.8%.

All eyes now turn to the Federal Reserve meeting in Jackson Hole next week and Dr. Bernanke’s speech next Friday as market players hope for new signs of more quantitative easing in the cards. While U.S. data has been slightly improved lately, today’s unemployment report showed a spike and China continues to slow, along with Germany and Europe which appears to be entering another recession.

Light summer volume continues to be the standard as vacations take precedent over trading and this is likely to continue through the Labor Day holiday weekend.

Bottom line: Fundamental factors remain weak as the global economy slows. Technical indicators show slowing short term momentum at significant resistance levels but within the context of a bull market. Global markets appear to be taking a breather after the recent rally and wait to hear from Dr. Bernanke next week in Jackson Hole.

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