A MACRO MOMENT, From Bob Doll, vice chairman and chief equity strategist, BlackRock

While many investors have been unnerved by current events, we believe the broader economic recovery remains on track. The cyclical recovery in most countries (including the United States) remains intact, as interest rates remain low and leading economic indicators continue to have a positive tone. That said, we acknowledge that US economic data has been somewhat less positive in recent weeks, with the decline in unemployment claims having stalled and with upward revisions to corporate earnings slowing down. In any case, we expect second-quarter gross domestic product growth to come in over the 3% level, but it will likely not be over 4%.

Given the magnitude of the recent currency and sovereign debt concerns, equity market performance is likely to be driven by the broad macro outlook rather than company-specific fundamentals. This is usually the sort of environment where volatility remains high in both directions. It is important to remember that corrections during times of economic recovery are normal, but are often intense and quick.

Regarding the current correction, we believe the worst should be behind us in terms of the magnitude of the downturn, but it will likely take some additional time before markets can repair themselves. Looking ahead, one positive factor is that market valuations have become more attractive in recent weeks, as prices have dropped while earnings have increased. Over time, we expect that additional clarity around the situation in Europe and financial market reform in the US should provide a measure of stability; and a sense that the economic recovery remains on track should help spark a turnaround in the recent aversion to higher-risk assets.

WHERE TO FIND THE BULL MARKET, From Jeffrey Saut, chief market strategist, Raymond James

Since the mid-1970s, I have voiced the mantra, “There is ALWAYS a bull market somewhere and it is my job to try and find it.” For example, even in the vicious bear market of 1973 – 1974, where the DJIA lost nearly 50% of its value, there were stocks that went up. That said, by my method of interpreting Dow Theory, there was a “sell signal” last week when the DJIA broke below its May 7th closing price of 10380.43, confirmed with a similar break by the Transports below their May 7th close of 4298.12. If past is prelude, however, so much energy has been expended in registering the signal typically the market rallies on said signal, especially given the aforementioned oversold metrics. While some modern-day Dow Theorists opine there has been no “sell signal,” because there wasn’t enough time between May 7th and the May 20th breakdown, I was not taught to view Dow Theory that way. Hence, if a rally develops, I will be watching the stock market’s “internals” for signs of the rally’s health. My “lens” will be indicators like Buying Power and Selling Pressure, Advance/Decline Lines, New Highs versus New Lows, on-balance volume, etc. as I think the strategy will be pruning weaker stocks from portfolios and becoming more defensive.

The quid pro quo is, for last week’s Dow Theory “sell signal” to be reversed requires the Industrials to close above 11205.03 confirmed by the Transports close above 4806.01(IMO).

Speaking to “there is always a bull market somewhere,” I was on CNBC last week with a particularly bright fellow. Todd Schoenberger, of LandColt Trading, talked about crude oil as being the world’s future currency. I agree for a multiplicity of reasons and would note the disaster in the Gulf of Mexico pretty much assures the value of Alberta’s Tar Sands, which is the second largest crude oil deposit on the plant.

WHEN WILL BANKS START LENDING? From Milton Ezrati, senior economist and market strategist, Lord Abbett

After falling 10.2% in 2009, overall bank lending has fallen an additional 7.2% so far this year, even in the face of a developing economic recovery. The continued drop in 2010 is widespread, too. Commercial and industrial loans have dropped nearly 16%, commercial and residential real estate loans 6.8%, and consumer loans 7.0%.
All this has occurred despite considerable heat coming out of Washington. In addition to the president’s impatient demands, perhaps more remarkable is the passion shown by Sheila Bair, chief of the Federal Deposit Insurance Corporation. The banks “need,” she has insisted, “to step up to the plate” and increase lending. She has spoken of shining a “very public light on banks where credit is not being provided.” Though Ms. Bair wants to avoid a command and control “situation where regulators are starting to order banks to lend,” she seems happy enough with a pattern of bullying.