The stock market greeted the new week with a post three day holiday trading drop. The Dow was down about 185 points taking it back down to last week’s low, three up days of trading overwhelmed by one down day. These are the kind of days that should scare the world a bit and Japan is down this evening as we write this (about 2%). The broader market was down taking the indexes down to last week’s lows. What happens now?
Let’s examine the day’s trading first. In our last post we reminded you that the normal retracement of the prior decline would be to go back up to the range of 11,275 to 11,350 or there about. The stock market wasted no time in acting on the notion that the market had reached a resistance point and promptly went down at the bell on Tuesday.
Typically, the corrective action is a little choppy before another wave down would occur. We have said that this time of the month is a normally strong period and with today’s action, we could see another up move that completes the corrective move.
One issue that is important on a day like Tuesday is the complete lack of news to justify this decline. The media did what it could to “explain” Tuesday’s drop. There was the consumer confidence number that was down but better than expected and the media said that, yes, it was better than expected but the actual move down was large. Then there was the Wal-Mart and GM news that took those stocks down a bit but those are only two stocks. Finally, there was the news that the Snowman, Secretary Treasurer Snow, was stepping down and a successor from Goldman Sachs would step in to take his place. What happened to the “tough Fed” talk and the end of the interest rate increases if weakness shows up?
Our thought is that the market wanted to go down and it did. The news of the day did not do much to affect the market and that is the kind of day that should put some fear in the traders. There was a bit of fear but there was no Panic selling and we continue to wait for some overwhelming fear before we want to be getting long this market.
We are not concerned about the near term action but are more focused on the continued decline in stocks over the next several months. These coming days will push the market down and will give some pain to those who stay long. Yes, of course, there will be some up stocks but your mutual fund will be trying to beat the averages not give you a positive return. We suggest selling into any strength that develops.
There is a news item that is coming on Friday that really could move the market and that would be the jobs’ report. Right now, expectations are running around an increase of about 180K new jobs being created. We will be focusing on Friday for a possible weaker number than that so that the interest rate fears can be calmed—you know, the Fed can stop raising rates.
Be careful out there…
Dow Industrials: 11,094.43 -184.18
RYVNX: 21.67
RYAIX: 23.84
TLT: 84.17
BEGBX: 13.65
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