Once again, good old Greece made the headlines today along with a Club Med friend, Portugal! We were kind of wondering what it would take to give this market a real reason to sell off and now we know. The news of debt downgrade for Greece and Portugal was not unexpected, but `junk` status makes it one (Greece) of the world`s riskiest debts. End of the ‘big’ earnings out of the way, it is a legitimate catalyst for sellers to push this market down about 30SPX points. Also, the usual end of month profit taking played a role after a run.
We'll not get into the implications of these downgrades as anyone can pull up a financial news and read up on it. What we are concerned is whether today's move signals an imminent correction with some more downside ahead of us. Of course, the fact this is happening in the middle of a really good earning season makes the thinking even trickier. We have seen this market come back from a massive selloff from a week ago. In fact, after today's decline, some of the sectors, including financial and commodity, are already sitting at a sizable loss from their peak not too long ago. So, even if GS was up today, there is still residual from that day's smell that lingers.
For this market, which carved through at least 4 supports of interest today, (including the channel we had up here recently and a close below 20ma finally), the next support is at around 1175/1170 and it's honestly not that far away and it takes maybe only few hours of work. Does it mean that we'd have a reasonable chance that market can hold at that level and bounce from there? What we know, at this point, is that after today's decline, this market won't go down any further without a fight. We bet that for every 10 point drop in SPX, we are going see some buyers step in to bid on some stocks that had good EPS reports.
Honestly, with or without Greece, this market is signalling one way or another that we need to consolidate around 1200. Again, today's news is a "perfect" excuse to lock up some people's months long's hefty profit. So what is DJIM doing assuming we may get a correction on the way? For us, buying dips in small chunks is the way to go until the market reverses the trend. In addition, we still have many companies that haven't reported yet and it's worth continuing to hunt the good ones, but earnings for now will take a backseat for a few days at least. So, be careful chasing a good report as it was possible for the last 2 weeks, it may succumb to profit taking quickly for now.
Bottom line, this market won't be a snoozer in the next little while. We are sure that we'll get plenty of action as we head into May.