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Dallas, TX
June 2, 2010, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Mixed Technicals And Generally Glum Status Of World Suggest More Volatility Ahead
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What's Hot Today: |  |
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U.S. stock index futures were pointing to a higher opening on Wednesday.
The Euro remained below 1.23 on the dollar overnight. European stocks
were lower. Asia was mixed. Low volume summer trading may have started,
though, which means that trends could be hard to decipher for a while.
News For Thought
SEC wants to bar Obama's former car czar from Wall Street. According
to The New York Times: "As it investigates a suspected kickback scheme
in New York’s pension system, the Securities and Exchange Commission
has been pushing to bar Steven L. Rattner, a prominent financier and
former adviser to the Obama administration on the auto industry, from
working in the securities industry for up to three years, according to
three people told of the discussions." Mr. Rattner is under investigation
for his alleged involvement in a kickback scheme involving a pension
scheme in New York State.
The Times added: "The S.E.C. and the New York attorney general, Andrew M. Cuomo,
have suggested that Mr. Rattner improperly paid off a political operative to
win lucrative business from the New York state pension fund — in one case, by
arranging to help distribute a low-budget film for the brother of a pension fund
official. Mr. Rattner’s former firm, Quadrangle Group, paid $12 million in fines
to settle with state and federal officials in April, but Mr. Rattner was left
out of that agreement because he would not accept the S.E.C.’s proposal that
he be barred from working on Wall Street, people briefed on the case said."
Home loan demand dries up as Federal buyer's credit expires. According
to Reuters: "Demand for loans to buy U.S. homes fell last week for the fourth
straight week, holding 13-year lows, as the housing market adjusted to a selling
environment without the federal tax credits that had stoked April sales, the
Mortgage Bankers Association said on Wednesday."
Layoff activity flattens out, suggesting some stabilization. According
to CNBC.com: "Employers fired as many staff in May as the previous month, according
to the latest job-cut report released by global outplacement consultancy Challenger
on Wednesday." The report added some details that were not exactly as upbeat
as the headlines as "The Challenger report indicated that the pace of job losses
edged slightly higher in May, as employers announced plans to cut 38,810 jobs
from their payrolls. This was 1.3 percent more than the four-year low of 38,326
job cuts announced in April, but 65 percent lower than one year earlier, when
planned job cuts totalled 111,182." |
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Mixed Technicals And Generally Glum Status Of World Suggest More Volatility Ahead
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Stock Market Mirrors Highly Conflicted, Fragmented, And Difficult World
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U.S. stocks tumbled on Tuesday, keeping the S & P
500 (SPX) below its 200-day moving average.
Chart Courtesy of StockCharts.com
The Amex Oil Index (XOI), led lower by heavy selling in BP (NYSE: BP) was
the poster child for Tuesday’s rout in U.S. stocks. But they were not alone.
Chart Courtesy of StockCharts.com
But the energy stocks were only part of the problem. In fact, the small
stocks in the Russell 2000 Index (RUT), which led the market on its most
recent up leg, are now very close to breaking below the 200-day moving
average, a feat already accomplished by the S & P 500 (SPX) and the
Dow Jones Industrial Average (INDU). What’s more worrisome is that both
the Dow and the S & P 500 have not just fallen below their respective
200-day lines, but that they’ve already failed to rise back above the key
technical mark. The 200-day moving average is widely accepted to be the
dividing line between bull and bear markets. More important is the line’s
role as signal of whether the long-term trend (months to years) is up or
down. Markets above their 200-day line are said to be in long term up trends,
and viceversa.
Chart Courtesy of StockCharts.com
The market's breadth is also an important indicator. The Nasdaq's advance decline
line (NAAD) made a new low on 6-1, although the New York Stock Exchange A-D line
didn't. The NYSE A-D line is the traditional breadth indicator, while some money
managers have replaced it by looking at the Nasdaq A-D line. The argument is
that the NYSE A-D line has too many ETFs, closed end mutual funds, and preferred
stocks, which distort the breadth figures.
Chart Courtesy of StockCharts.com
The difference between the two lines is quite marked. The NYAD is painting a
less negative picture than the NAAD. This divergence in the two advance decline
lines suggests that the deterioration in the Nasdaq is much more violent. And
if you believe that the Nasdaq's AD line is a less distorted view of how many
actual individual stocks are advancing versus those that are declining, you can
see that the damage to actual stocks seems to be more intense than that indicated
by the NYSE A-D line.
Chart Courtesy of StockCharts.com
Conclusion
This market is fighting for its life right now, and there are too many analysts
that are way too positive about its prospects. The key for us is the breakdown
in the market's breadth, and the cratering of the small stocks which are about
to join the already suffering large stocks in breaking below the long term support
of the 200-day moving average.
There are just too many unanswered questions in the global economy and the geopolitical
situation for anyone to be comfortable with making any long term bets. And the
inability of any government, be it Washington, Berlin, Brussells, or Beijing
to actually deliver any credible solutions to any of the problems that they face
is not helpful.
As time passes, the U.S. will also start to fret about higher taxes, which Mr.
Obama has not mentioned lately, but are coming, since there is no activity in
Congress that suggests anyone is interested in trying to extend the Bush era
tax cuts.
The bottom line is that this is a market in which caution and patience are likely
to be the best of virtues.
We'll be on Twitter
some time today before the market closes with some updated comments.
Know when to sell and how to make money when the market falls. Get
a detailed trading plan in your pocket. Read Dr. Duarte's All
NEW Books "Market Timing For Dummies." and "Trading Futures For Dummies." The Trading Manuals for
All Seasons. Also Available As Kindle Books. |
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Market Moves - Stock Of The Day
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Wells Fargo (NYSE: WFC) Slips Into Bear Territory
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Oversold shares
of Wells Fargo (NYSE: WFC) are tracing a negative pattern.
Chart Courtesy of StockCharts.com
Wells Fargo owns Wachovia and is continuing to transition
many of its branches away from the Wachovia name to the
Wells Fargo name. The company is doing so in Atlanta, and
is also adding some jobs accross the south.
Yet, the stock is struggling after having held up for a few weeks even as the
market was starting to stumble in April and May.
Wells Fargo argued that the losses are only $14.1 million and that they were
due to market conditions, not bad investment advice or poor investment tactics.
The non profits allege that Wells Fargo invested in Structured Investment Vehicles
(SIVs) that included subprime mortgages. The SIVs defaulted in 2007 and 2008.
The stock is struggling, along with the market, to remain above its 200-day moving
average. Once the news breaks about the jury's decision, we suspect, we'll know
a bit more.
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