What appeared to be healthy digestion/ consolidation morning of the rally from 1266 quickly turned into a sell off as any supports were easily sliced through by lunch hour. Discussed recently how markets R/S lines have had little effect.
What were the culprits?. Well, you have to look at the fact economy related stocks/ sectors, high beta selling was strong to understand. The market did a roundabout this morning as attention has turned to the economy and away from Europe drawing up a roadmap into month’s end summit.
Although most Global flash PMI’s showed some signs of stabilization, powerhouse Germany was worrisome. Also, U.S flash came in at ~52-53 softer than expected/declining m/m and an ugly Phily Fed followed. The usual trade of bad data is good reversed today. (bad data being good for QE button to be pushed).
Importantly, although the FOMC was being called ‘dovish’ by the likes of WSJ and Economist journalists this morning, the action in a softer Gold and stronger USD signalled the call here that the FOMC was ‘less dovish”.. “Forget about the wildly speculative outright QE not happening, the actions were even less dovish than the reasonable expectations, yet market had a ho-hum attitude. Maybe that will change some overnight, but if any selling does occur, it should viewed as a buying oppy as concluded heading into the trading day.”.
Question is it a buying oppy’ ...(thus releasing this during trading hours).
Considering the quick market change in focus, it may have to wait as market doesn’t think FED will come to the aid of the stock market fast enough due its hawkish tone (as per Gold/USD today). Bad data is bad data today.
Also entering the week, noted corporate earnings will be back in focus. Well, this has been pretty disappointing adding to the ‘economy’ focus market turned to today. Outlooks have not been great from techs like RHT. Also, many media reports out of companies cutting back due to demand lagging. BBBY results didn’t help the retail/consumer side.