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After a horrible pending homes sales number (down 30% sequentially in May; down -15.6% y/y), this bear market is gaining momentum to the downside. At a point, the SP500 will bounce from oversold levels – bear markets always do – but to lower-highs, as we keep selling off to lower-lows.

This morning’s ISM print in the US was more of the same in terms of what we saw overnight coming out of China (PMI slowed sequentially) – global economic growth is slowing. We walked through our GDP estimates for the back half of 2010 and into 2011 on our Q3 Macro Themes call this morning. Consensus is playing catch-up now in re-pricing expectations for go forward growth.

Some players are trying to pick the bottom here today. We’ve tried that in prior bear market cycles and don’t like the risk/reward setup in doing that here today - not in front of a long weekend and before another long line of America’s unemployed getting reported tomorrow morning.

Bottoms are processes, not points. Our immediate term TRADE line of support is now 1011.

KM

Keith R. McCullough
Chief Executive Officer

Bear Market Macro: SP500 Levels, Refreshed...  - sp