Into the trading day...

Heading into the day with World Cup fever we gave the market a “yellow card”,  citing it for bad behaviour with a ‘so be cautious’  final words.    Well,  let’s just say, it didn’t change it’s ways and only exuberated it’s ‘pessimistic’ tendencies garnering a ’red card’ and a cleat to the groin.    In essence this ‘red card’ was rudely given to investors who were forced to leave the market game with heads hanging down in defeat.  The investor has been given many reasons to leave the game in the past few years and go find a new game to play due to no trust in the system.  Most recently scared from ‘Flash crash’ to today’s revised US Conf. Board revision to China’s economic index  (The Conference Board Leading Economic Index (LEI) for China increased 0.3 percent in April to 145.0. The LEI for China was previously reported to have increased 1.7 percent in April but has been revised to correct a calculation error) ,  the investor is befuddled as to the fair play rules of this investing game!.   A ‘smelly’  problem bolded last Journal was the highlight today for media as all discussion centered around the TSY’s !.   We’re not overly concerned about the CCI # , just because ramifications of all activity from Europe to BP to a bad stock market in May had to have ramifications sooner than later. 

Only last week, we discussed the ‘disheartening’ nature of being a ‘long investor and how ‘these extreme sell offs that are seemingly so easy”.   Today, unfortunately it all played out as the ETF trade of over a week turned into selling of individual equities with reckless abandonment.   The exodus finally happened.    Nothing was left out, no sectors at all . ….Unbelievable carnage today as every play was seemingly off 4-5% minimum and many at /or near a double digit gain loss by lunch hour…industrials, Financials, tech 4% (SOX just under 5%), Discretionaries, Materials 3.5%, Steels issue as much as 10% some, and even defensive Health care was off nearly 2%.   Investors seemingly work for days/ weeks to get a nice run in a stock of 2-3-4-5% and than in one swoop it’s all taken away and more as today proved, especially in high beta/ winners…into 24th “The only thing you’d have to watch is your position size, notably in what you know are high bet/high volatility stocks”.  This fact never changes in the game as money flow in the best,  leaves the fastest.

What’s occurred here in June is a head fake has been manipulated.  Essentially, what has happened is the recent move to 1130 on ‘softer data’ was orchestrated to get out of the market and than use this usual Q end week to markdown.   This recent action exemplifies the market should not have gone up on ‘softer data’.   Why should it have, it is the opposite of what it should have been doing, yet it grinded higher.  …“For some reason, this market has been able to shrug off a number of disappointing Eco. data lately.    Although this may seem positive,  we don't believe this is the kind of trend people like to see as this week is proving to be a set back (not holding 200ma).  Our most important gauge is the 20MA and the market is toying with it today.”.    So, that’s the No-trade clause for anyone thinking of being that investor who is thinking of holding onto stocks for a while.  Need to get above this bear gap formed now to think long for long.

As far as that 20ma, since we noted this last week, the market has closed below it every day and as of close today, we’re something 45 pts below it.  Simply..the rule here is if you’re being toyed with, it’s best to exit before you become a toy puppet yourself.    Now, as the 1072 has fallen and the 1040-50 IS in play again.   In discussing 1040-1050 in play yesterday, we also said the only alternative for the Bulls to get some buying is a ‘ downside’ break.   Well, we got it and unfortunately it was hurtful as it wasn’t just ETF based.  It did take valuations down quickly on individual stocks, which is not so bad going into earnings.

Now..as far as a tradeable play, 3 hopes  for such...

• China PMI Wednesday is 'fudged' and makes this revision today questionable
• ECB liquidity tender expiry coming up, which is a monetary tightening fear comes out not as badly as feared.  If demand smaller tomorrow than feared in 3mth, it should be somewhat of a relief.
• NFP# comes in the top range est., ADP may give some light tomorrow.