Top Line: The stock market tried to put on its normal happy face when the opening bell rang. With the big selloff on Tuesday, there were many, we suppose, that were hoping for at least a modest bounce today, Wednesday. That did not materialize and instead we saw a continuation of the selling. We have been mentioning the 12,750 level as a significant area of resistance and it seems that level has contained the latest rally. The highest Dow print was right around 12,767 about 17 points higher than our mark. We don’t think the market can get back above it after the last two days of trading, lower.
Before the market opened, there was a yawn when Toll Brothers announced that it doesn't see any end in sight to housing-market woes. The housing news must have been completely priced into the market by Wednesday morning...Well, maybe not quite.
The news that may have tipped the market over in the morning came from Macy’s who said they were going to have lay off about 2500 workers. There could have been another reason, too, which was a voting Fed member saying that the Fed’s job includes price stabilization. The market took this as a sign that the Fed was possibly willing to keep interest rates where they are for the time being. We don’t think this is even a real consideration for the Fed. The Chairman is committed to the idea that he can singlehandedly keep the economy afloat. This delusion will soon be rectified but in the mean time we are going to see lower and lower rates from the Fed as Bennie tests his theory.
The market couldn't maintain the rally it started in the morning and has now dropped below some key support. That doesn't mean we'll see an immediate drop but it does mean there is a lot of weakness.
The market had a blow after the close when CSCO CEO John Chambers discussed the outlook which didn't make anyone too happy. The stock fell about 7% after his comments and pushed the US futures down into the evening hours. We can only wait to see if there will be any carryover in the morning. We have to believe that the participants are getting a little tired of seeing the market go down after they buy.
FSI: 75.39 (new low)