While the market didn’t lose much in terms of price, it’s still in its correction as evidenced by the back test of the 20- and 50-day exponential moving averages today that saw selling off those key resistance levels. They were both strong support levels not too long ago, but they have now turned into strong resistance levels. All of the key sector, index charts tested those levels today only to see the sellers come marching in to take things back down. This selling came even after we were up early on due to the better than expected employment report that came out one hour pre-market. There were 171,000 jobs created with expectations at 125,000. The futures shot up on this news allowing for a gap up open, but it didn’t take long for the selling to come back in and take things into the red across the board.
Nothing horrific, but we did see all of the gains go away, which is classic in a short-term, down-trending market. What I mean by that is not even good news can help very much when a market has a destination in mind. It’s no different when things are good for the market. No amount of bad news can spoil the party. Now, even good news gets ignored as the down trend continues onward. Again, nothing out of character, but a trend is a trend and will go where it planned on going until it’s finished. It will upset the masses and confuse most. That’s the whole point. So this week saw some rally attempts, but in the end, those 20’s and 50’s held the move up, which can’t be considered unusual by any means. The bears still in control until the bulls can take back those lost 20’s and 50’s. That’s the bottom line folks. Those 20’s and 50’s are now the wall for the bulls, thus, the onus is on the bulls to get the job done just like the onus was on the bears to remove those levels. They spent a lot of time trying but kept failing. Now the bulls are trying and, for now, they are failing.
Sandy did something to the stock market that hadn’t happened since 1888, and that was to shut it down for two days. I live at ground zero and must say I can’t even grasp how it opened after only two days. I guess some places get special attention. There are people in that area that won’t have power for what turns out to be one to two weeks. Anyway, Sandy did play havoc with the market in terms of keeping it closed, but now we turn our focus to what it will do to the economy in the months ahead. The market understands that many businesses will suffer great losses due to the storm, so I have to believe some of that will be built in by the time the next earnings season appears in three months.
However, we can’t fully grasp what those affects will be. It is possible that Sandy will help push back down to contraction regarding manufacturing. Let’s hope this isn’t the case, but since Sandy comes around these parts roughly once a century, the affect are still to be seen over time. The market handled it without too much downside stress short-term, but the longer-term affects will only be known in the months down the road. Let’s hope things aren’t as bad as the potential would suggest.
Time. Patience. Two words that most stocks market players don’t want to hear, and the biggest reason why most don’t survive the game. This is a big casino. Nothing more and nothing less. When you’re in a casino you want to play. I mean, think about it, why else do folks go there? To play! To play hard in most cases, but always to play often. It’s no fun sitting on the sidelines. It’s no fun not being involved. The stock market is just as tough to ignore. It’s fun. It offers up possibilities. Folks want in. Problem here is there isn’t much to be in now. If you over play here you are going to suffer huge losses unnecessarily and then you’ll get turned off to the game completely. Learn how to be patient. It’s part of the game. If you can be patient it’ll pay off big time down the road. Remember, time moves on. Don’t make mistakes that cause you harm for no reason. Be smart and be patient for now. You’ll be glad you did.
Apple Inc. (AAPL) continues to crater hard, since their earnings report have not gone well for that stock. When I saw those folks on CNBC some weeks back saying it can’t go down, I had the feeling that the kiss of death had been planted on AAPL’s face. The weekly negative divergence is playing out to the tune of losses off the top of roughly 120$. They all get hit in time, but the focus is on AAPL here because it’s the market leader, and thus, we must look for a classic bottoming stick in the days and weeks ahead to get a sense that the selling is basically over. Unwinding is occurring quite rapidly here, and it’s exactly what the market needed. There can be more selling. If the S&P 500 break below 1403 we can see 1375. Under no circumstances would that be bearish technically. No guarantee we’ll get there, but it’s still very much in play. Next Wednesday we’ll get the next set of sentiment numbers and they should be working in favor of the bulls. We shall see.
In the meantime relax and keep things very light.
Peace,
Jack
