DJIM #45 2010
Monday, November 15, 2010 at 08:13AM A non-event week consisting of digestion turned into a slew of events to pressure the market to the downside. Question is if it’s still digestion/consolidation?. The answer will be if the benchmark (20MA) used here for the broader markets for the past few years holds after being tested.
The uncertainty over CSCO’s guidance, a day late reverberated over the markets along with worries over peripheral (Ireland)/ a China hike following a hot inflation number/ recovering USD are all playing a role. Preceding the Friday sell off, we discussed the market looking at CSCO’s call with rose colored glasses, well, the blinkers attached also came off a day later with the Nazzy down 50pts at it’s low. Also note, the Irish noise /China hike expectation was in the market a day earlier, but the market waited a day to blow off steam. Simply, the market was “..blue in the face “ from consolidating with no tailwinds at all to support and fight. It was just a matter of time before it couldn’t take no more and as alerted in the morning, if the Dow and/or AAPL couldn’t hold technically, the market would slide.
None of the issues surrounding the market are ‘big’ enough on their own, but bunched together leave us in the same cautious stance from the last 2 days entering this trading week. Still, above 20MA there is no reason to believe dip buying in individual equities will stop. You can see this by the outperformance of individual equities from the Shawdowlist vs. broad market indicies.
The market will need some clarity before any upside possibility, it will be a busy week on all fronts from Europe to more U.S Oct end tech reports to the first Nov eco data points.