Yesterday, my word for the day was “conflicted.” Today, David Moenning over at State of the Markets has his word for the day and it is …
- The word of the day appears to be weakness.
One reason he is suggesting this (among others including his technical charts) is the overseas markets are showing weakness from a lack of encouraging news.
- Asian stock markets are down across the board this morning in response to weaker-than expected FDI (foreign direct investment) data in China, which showed inflows hitting the lowest level in at least two and one-half years.
- The ZEW Investor Confidence data in both the Eurozone and Germany continued to be surprisingly weak (Germany’s ZEW index came in at the lowest level since December 2012). As a result, European bourses are also a sea of red this morning.
The problem we have here, though, is confliction. Even though Europe and Asia are down, the US market is not. In fact, at this moment, it is pushing hard into the green. The VIX is retreating as well. What’s more, technology and small-cap stocks are going after what they lost yesterday. Perhaps, there is a reason for this.
- U.S. producer prices were flat in August, pointing to muted inflation pressures that should see the Federal Reserve in no hurry to raise interest rates.
My guess is the above is the driver for today’s market, along with the fact that the US economy is following a different path than either China or Europe. The former (Fed stuff) is nonsense, and yet still true, and the latter is fundamental, which means, until that reality changes, the market will continue to do what it is doing.
The only way this changes is if some catalyst either spooks the market or ignites the market. That catalyst will have to be big and powerful, though. It will take more than bad economic news from overseas or, apparently, more than consistently good economic news from the US.
- While there does not appear to be any panic in the market at the present time, the action this month has been sloppy, to say the least.
Yup, the market will remain volatile until it is thoroughly consolidated or a catalyst arrives. Then again, maybe the bulls will just get tired of waiting for opportunity to come in the form of lower entries from a “correction.” As always, we will see …
In the meantime, check out the solar section. There seems to be some money flowing in that direction.
Trade in the day; invest in your life …
