Europe Sinking...USA Holding...
Over the weekend, we saw some terrible news come out of the Euro-zone with regards to manufacturing and economic growth. The news was particularly bad in that the numbers weren't supposed to be any good to begin with, so when the numbers came even worse than that, the whole Euro-zone took it on the chin with losses nearing three percent across the board. Some worse than others, of course, but the average was nearly three percent. Ugly as can be. With news that bad, and with the Euro-zone getting smoked, we were unable to avoid the carnage pre-market. Our futures looked pretty bad, but nowhere near as bad as the losses being seen across Europe.
We were down just a little over 1% to open the day, and ended up moving lower, getting down roughly one and a half percent before we started seeing buyers come in off oversold short-term 60-minute charts. The Dow ended the day, down only 102 points. Not even one percent, which again, is dynamically better action than what we saw in Europe. The day was a good one for the bears due to the losses seen in the averages, but in reality, the bears can't be overly thrilled with our markets only being down a bit under one percent, while Europe was hit three times harder. The bulls can take away something from that.
The market is sitting on two major events over the next two days. First up we have the earnings from Apple Inc. (AAPL) tomorrow evening after the market closes. The world will be tuned in to hear if things are still perfect for the most important, and loved, stock on the planet. The stock has run up quite a ways, although, it has pulled back nearly eighty dollars of late. Don't forget, not too long ago, it was 360, and with the pullback, it's still near 600. Basically, what this means is there's huge risk if the stock can't come through with just perfect numbers tomorrow evening. If they warn in any way, or simply don't raise guidance, it could take quite the hit.
On Wednesday, Fed Bernanke speaks, and the world will be listening in, especially since there’s such terrible news from Europe. The world will be interested in hearing whether he talks about adding more stimulus to the global markets or not. If he says nothing about stimulus, that might not be the best news for the world stock markets. He's fighting a losing cause bigger picture, but for now, the world wants more cash running through its veins. Forget about the price to pay later. Just give me my cash now and save the day. It won't end well, but no one really cares anyhow, it seems. Go ahead and cause more inflation in order to halt the inevitable deflationary spiral that we saw today in Europe. Save the USA for the moment.
I warned that when the market snapped and started its correction of potentially 5-8%, it would feel as if the market was done, that it could never go back up again. All corrections feel this way. The reason is simple as we all should know by now. Fear takes over! We know that this is how to unwind the oscillators to a point where the market can rally again. The key will be buying when this market signals another buy signal in the not too distant future. It'll be tough to buy because the market won't look pretty technically, and of course, because all selling causes fear, you have to have the stomach to go in and buy when things look just awful. Not an easy thing to do.
You'll have to fight through fear, and nothing is tougher than that. When we find the bottom of this move, it doesn't mean the market will just blast out. It won't, but it'll work its way higher piece by piece, and thus, you can do well on new entries. We still likely have more work to do once Apple, and the Fed, are done this week. But you never know. 1340 down to 1325 is in play, but it doesn't have to get that low. You know the saying, if everyone expects something to happen it likely won't. You have to recognize how the charts look, and they do say 1340/1325 S&P 500 is in play for now. Hopefully, it won't go there, but it's definitely in play. 1422 remains very difficult longer-term resistance. We shouldn't be ready to clear that level any time soon, but as always, we take this crazy game one day at a time.