S&P 500 ETF- SPY Weekly Analysis (8-1-10)

S&P 500 ETF- SPY

The S&P 500 ETF ,” that uses the symbol “SPY,” has been influenced by the stock market this week. Its stock price stands at $110.27 As we learn in MSN Money Snaphot they write this about the Fund: “The investment seeks to correspond generally to the price and yield performance, before fees and expenses, of the S&P 500 Index. SPDR Trust is an exchange-traded fund that holds all of the S&P 500 Index stocks. It
is comprised of undivided ownership interests called SPDRs. The fund issues and redeems SPDRs only in multiples of 50,000 SPDRs in exchange for S&P 500 Index stocks and cash.”

Friday mirrored what the rest of July really acted like! It saw investors alternately buying on strong earnings reports and selling on weak economic numbers. The Dow rose 7.1 percent for the month. The Dow and the Standard & Poor’s 500 index both had their best months since July 2009 and their first winning months since this past April.

Will we stay the same coming into August? July was driven on second quarter earnings ans they are about over so the good news is drying up while current sentiment in the market is pessimistic.

The key to August is trading volume. Even on the larger increasing days, volume has been low during the month.

The short rally we have experienced in July leaves residual bullish signals in the indicators as well as a positive divergence in the RSI. These are all good signs. But they may be short lived.

With news influencing the market as always the downward revision of the GNP forward estimates reminds us of what most people (as long as you are not in government ) know– the recession was weaker and the recovery was lighter than what we were being told.

Unfortunately it appears the economy is slowing down. In the near future, the possibility of becoming even more sluggish is a factor because the government stimulus will disappear. The ECRI signals that we could move backward into a recession again. However it happened, the huge stimulus kept business moving, but is was artificial. There has not been true private sector growth.

Tax hikes are coming next year. This will destroy GDP growth. Most have been inventory cycle and it has already peaked. Real Final Sales measurement id all that is left and this is real public demand. It has been less than 1% annual rate. The tax increases are suppose to influence the GDP by a negative 1.5% some analysts are saying. If all we have is (RFS) to measure and we are going to have a negative influence of 1.5% because of tax increases, how do we not have a negative GDP in 2011?

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