Written by Rich B. Meier
TopEquityNews.com
To paraphrase Frankie; investors have seen their portfolios up and down and over and out, riding high in October, only to get shot down today.
Are you reaching for the Dramamine yet
To start October, the tape was 30 minutes away from a bear market when suddenly the Wall Street algorithms (computer programs) kicked in and sent stocks higher for the next three weeks. The double-dip a passing threat, the Euro-debt crisis someplace down the road and a 2.5% GDP made the pain go away – hip, hip, hooray, and stocks are up day after day.
So what happened yesterday A superfecta of bad news.
First and foremost, the Greeks threw the deal makers, Germany’s Merkel and France’s Sarkozy, under the Euro-debt steamroller by putting last week’s “world saving” bailout plan to a referendum. Wall Street wasn’t betting on the Greek Parliament pulling on the frayed strings of a delicate bow-tie; tug too hard and we will find out just how many PIIGS are behind the walls of financial institutions around the world.
Next on the list of “oh no” news is China’s economy slowing down due to lower European exports. Today’s UK PMI Manufacturing report dropping to 47.4 in October is a sign that the continent could be headed into a recession. Generally speaking, 50 is the contract/expansion line, i.e. anything over 50 indicates a growing economy and vice versa.
Don’t expect England to be the only country on the continent or in the Union to report recessionary like readings, and with China’s number one trading partner limping, the Asian tiger might start running on three legs.
It’s not like we don’t have dysfunctional economic family members to deal with here in the States. And that brings us to the third reason the tape was dead red. The hope generated by last week’s GDP got a face full of cold water with news that manufacturing and construction spending softened up.
The US ISM Manufacturing report came in at 50.8 – barely above the 50 benchmark – and well below the anticipated 52 reading. October’s reading was also lower than September’s and a cautious reminder that the double-dip scooper might not be securely in the drawer.
The rising dollar completes the quartet of sour note news. As odd as it sounds, stocks and the dollar have had an inverse relationship for a while now: dollar up = stocks down and flipped around.
While you were sleeping, Japanese officials reiterated their desire to intervene and lower the Yen versus the Dollar and Euro. As an exporter nation, making their costs lower is a logical move and probably not too surprising.
Mix in the Greek curve-ball and the flight to relative safety of the greenback makes for a one-two punch of buying pressure. If the US Dollar index remains above $76, a return trip to $77 or $78 could be on the table; possibly rubbing out 50% of October’s gains in a blink.
There is good news and bad news in Tuesday’s closing prices, and they are one in the same. The indexes managed to stay slightly above support levels: NASDAQ 2620, Dow 11,600ish and S&P 1220ish.
It’s good news if the trio manages to rally off current levels. Gains from here would clearly establish a bright red technical X marks the spot to sell on the charts. However, we are so close to the backstop that if we get a bad Employment Situation report on Friday, it is unlikely the wall will have the strength to withstand the selling pressure that would follow.
Make sure you check back with us tomorrow as we will update the technical picture and highlight a stock or two that insiders are buying now.
The Markets’ Big Fat Greek Surprise is an article from: 
