Thursday, July 12, 2012

Stocks Have a Wild Ride Close Lower

Earnings season has not been kind to stocks and it kicked started the market to the downside. Europe’s markets were selling off as the EURUSD fell below 1.22. Selling was intense, but backed off as buyers stepped up. The NASDAQ sliced through its 50 day moving average while the S&P 500 was able to hold above its 50 day. Volume rose on the day across the board as another distribution day is added. The last 15 minutes of the session was met with sellers trimming a good portion of gains seen since the morning lows. Today’s action was not terribly bullish despite coming off the lows. We remain cautious here. Stocks like PG and WMT were helping out the Dow Jones Industrial Average move higher. The Dow was the index holding up best today is a key sign investors were moving in a defensive manner. We do not believe a market lead by the Dow will be one that produces a strong move to the upside. Our leading stocks continue to look weak and are not inspiring much confidence in this market. We’ll stick to our rules and await our signals. Interesting headlines hitting the wires tonight with Italy being downgraded two notches by Moody’s and China’s GDP growth figure. Italy’s news is not really surprising to me, but I’d argue its rating should be junk. Remember when most investors were duped into thinking the Greek’s would meet their obligations? When all is said and done Greece is likely to have all its debt liquidated leaving bond holders high and dry. Will Italy and Spain be any different? Certainly just as big will be whether or not China is slowing more rapidly. Then again, can you trust what it prints for GDP growth? Too much speculation to gamble money on, but is an interesting intellectual debate. Remember leave the investing to a rules-based system rather than an opinion! If I had to guess tomorrow we’ll see stocks climb higher and close in the green. Then we can get headlines into the week the indexes snapping its losing streak. Investing based upon this would simply be gambling. Trade your plan and leave out the guess work. Have a great weekend and get out there and enjoy life.

No comments: