Let's Call It Constructive

The fact that stocks pulled back a bit last week shouldn't have come as a surprise to anyone. The S&P 500 had enjoyed an historic joyride to the upside in a very short period of time. As in +19.2% in just 10 weeks.

Along the way, stocks became overbought and sentiment got a little too optimistic. Everybody could recite the bull narrative... The Fed is now on hold (and perhaps even thinking about returning to an accommodative stance later this year) and the Trump trade deal will fix the global #GrowthSlowing woes.

So, with key resistance overhead and some disappointment on the news front, it wasn't exactly a shock to see a break in the action.

Speaking of the news, there were five headlines that caught my eye last week and, at least in my opinion, might have contributed to the red bars on the charts.

But first, we need to set the stage. Coming into last week, it was clear that momentum had slowed. The S&P had spent the prior week moving sideways and flirting with a breakout of the key resistance zone in the 2815 area. And since the bulls had been able to break on through to the other side of the all-important 200-day moving average the week before that, it seemed it was only a matter of time until the bulls would be testing the old highs again.

At the beginning of last week, there was an awful lot of talk about a "Goldilocks economy" here in the good 'ol USofA. As in the economy wasn't too hot (to cause inflation and the Fed to get back to work), wasn't too cold (to cause a recession) but was "just right" (for corporate profits to grow at a strong enough rate for stocks to continue to rise at 8-10% per year). Party on, Wayne!

But a funny thing happened on the way to the run for the border. That's right; it didn't happen. Nope. Instead, the #GrowthSlowing theme may have gained some traction.

First, there was the ECB "pivot." This time it was Mario Draghi's turn to surprise investors as the ECB acknowledged the slowdown in economic activity by cutting the central bank's forecast for growth in the Eurozone in 2019 from 1.7% to 1.1% and by offering up a new cheap loan program designed to encourage lending.

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Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.

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