This June, the major U.S. equity indices swooned heavily as oil bubbled ever higher and financial sector woes returned to the fore. The S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices recorded monthly losses of
-8.60%,
-10.19% and
-9.62%, respectively: the worst in six years. Indeed, the Dow's 1,288 point drop on cracks in the global growth storey left it down three consecutive quarters and in official bear market correction territory -- a combined phenomenon not witnessed since the late 1970s.
Interestingly, implied volatility remained relatively moderate even as daily declines, some quite large in magnitude, were the norm. The Federal Reserve's decision to hold rates steady offered little respite as its inflation warnings took hold. To that end, oil hit record highs exceeding $143 per barrel, up $15 from the start of the month on dollar weakness, supply concerns and growing geopolitical risks from Iran and Nigeria. As a consequence, the automotive industry took an especially big hit with downgrades on slowing truck and minivan sales. Nonetheless, more than a handful of merger and acquisition announcements were made even as the Yahoo and Microsoft talks failed to bear fruit and not a single Venture Capital deal was brought to market.
Style-Box performance again showed relative strength in the Growth camp, although all areas were very weak. As for sectors, the Financials continued to struggle mightily on downgrade threats and additional write-down worries, while Energy issues posted a moderate gain.
Even an average sized bounce higher would be welcomed by the Bulls here as we head into the second half of 2008. That said, traders will no doubt be highly cognizant that an "average" bear pullback still lies some ten-percentage points below.
The Style Box was calculated using the following PowerShares™ ETFs: Small-Growth (PWT), Small-Value (PWY), Mid-Growth (PWJ), Mid-Value (PWP), Large-Growth (PWB), and Large-Value (PWV). The Sector Ribbon was calculated using the following Select Sector SPDR™ ETFs: Materials (XLB), Industrials (XLI), Energy (XLE), Staples (XLP), Discretionary (XLY), Financials (XLF), Technology (XLK), and Healthcare (XLV).
The Standard & Poors 500, Dow Jones Industrial Average and NASDAQ 100 may be traded through ETF proxies, including the SPY or IVV, DIA and QQQQ, respectively.
Sentiment: Very Bearish
Volatility: Moderate(VIX 18-24)
Direction: Down
