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This correction has been a bit overdue and maybe we go a little lower, but the volume today was not scary at all. It was orderly and we closed off the lows. As I mentioned last night, 1370 is the next logical level of support, below that maybe 1330-1350, depending on many things. One event could be Europe again, Spain hangs by a thread now and Italy isn’t much better.
The North Koreans are ready to shoot off a roman candle and the Mideast is bedlam on a 24/7 basis. With all of these moving parts, the market still looks fine from my perch.
The banks had a big move and needed to pull back, so did the housing stocks. Energy looks the worst (XLE), and today that ETF closed below its 50 day moving average. The Dow Jones also closed below its 50 day, which isn’t good, but it’s not the end of the world. The materials are failing miserably, (XLB) and need to find a bottom, maybe it needs to find the 200 day at the $ 35 level.
QE chatter spread around some trading desks today because we had a weak number on Friday. Frankly, I think it’s silly and completely unnecessary for QE3, but perception is reality, and if enough people think it, the market could move higher from Bernanke speculation. We live in a world where the market is the addict and Bernanke is the dealer. Greenspan was the same way, that era ended in misery and this one will too, but not now.
I jokingly opined on Twitter after the crash that what the country really needed was another bubble to get us out of the wreckage. It was tongue in cheek, but guess what? We are in the midst of the Bernanke bubble, Greenspan created the first one, we crashed, licked our wounds and this is Bubble #2. We are smack in the middle of it. That’s OK, the market will go higher as a result. Good bubbles take years to break.
Greenspan and his Administration wanted everyone “in” a house, they thought it was everyone’s birth right. Bernanke now wants everyone to “stay” in that house. Different names and players, but the same story.
But I digress.
Earnings are coming up this week. We get AA after the close tomorrow and big names like WFC, JPM and GOOG report this week too. This is the time of year when I cut my position size my 1/2 to 2/3. Too much funny business.
Because the market gapped lower through some stops I kept the names on the list. FIO looks the worst right now, but maybe we’ll get a bounce. back.
I don’t have any new names tonight, but try and keep your powder dry because we are getting oversold and some things will be setting up soon.
Have a great night.
Joe