Now we are down 3 straight, but recovered most of the 20+pt drop last night in the futures. We were range bound after opening soft when a QE3 discussion in the Fed minutes triggered some knee jerk buying. The buying quickly fizzled as buyers realized that QE3 is only possible if the economic condition were to worsen. It’s also obvious that market players are nervous about further negative news out of Europe as Moody’s downgraded Ireland’s debt this afternoon. We have the Italian bond auction Thursday and Euro zone bank stress test Friday later this week to contemplate.
Another negative is that warnings and downgrades related to Microchip Technology, Novellus and Maxim Integrated Products hit the technology sector hard. Money tried to hide in defensive stock stocks today along with an end of day rally in precious metals. That is worrisome action as we kick off earnings season since a decent 2nd quarter earning maybe be priced in but lower guidance in the 3rd quarter may not be.
Technically, we have a spiking VIX that rallied close to 30% in three days and is right below resistance of 20. Â And the McCellan Oscillator back in the neutral zone and other indicators oversold. We could certain bounce here, but the volatile European situation is keeping us contained.