Mr. Market Needs a 3 Day Weekend-Stock Market Blues

Mr. Market Needs a 3 Day Weekend-Stock Market BluesThursday’s Trading Recap:

The Stock Market was breathing a collective sigh of relief after the S&P 500, +1.7% at 1921.84 and NASDAQ, +2% at 4615.00 held the assault on the August lows in the first hour of trading Thursday.

Stocks were buoyed by Crude Oil stabilizing just above the $30 level before gradually moving 2% higher, and comments from Kansas City FED President Bullard that were more ”dovish” than what we’d heard from others earlier in the week.

Mr. Market Needs a 3 Day Weekend-Stock Market Blues

It did not go unnoticed that the 2 year note closed at 0.86%, well below where it was before the initial rate hike by the FED in December  By the end of the day the S&P 500 settled almost exactly where it started the week, but getting there has been a wild ride.

Less than half a day after the end of trading in the US Thursday, investors were back on Red Alert, as the Chinese markets were careening down 5% to new reaction lows, following more negative macro data on the Chinese economy. Oil reversed all of Thursday’s gains and then some overnight, as the commodity was again threatening the crucial $30 support level.   

Investors in the US woke up Friday to the harsh reality that we could very likely wipe out Thursday gains as easily as Thursday recouped the majority of losses from Wednesday.

Two hours into trading Friday it seems that nearly all key market indicators are at major inflection points. For the second day in a row the market is making a serious assault on major support levels from the August closing lows.  The difference from yesterday is that we have had zero lift off the lows from the first 30 minutes of trading.

Mr. Market Needs a 3 Day Weekend-Stock Market Blues

The S&P 500 has been in a range of 1875 – 1885, with the August 25 closing low of 1867 lurking just below.

Mr. Market Needs a 3 Day Weekend-Stock Market Blues

NASDAQ has losses of 3%, having broken the August lows. A close below 4500 would be the lowest close for NASDAQ since the October 2014 sell off.  At 11:15 am, NASDAQ is at 4475.

Mr. Market Needs a 3 Day Weekend-Stock Market Blues

The DJIA, -2.3% is right at the 16,000 level, certainly a big psychological round number, although this is above the August 25 closing low of 15,666.  Yes the DJIA has outperformed both the S&P 500 and NASDAQ in the carnage we’ve seen the first 2 weeks of the year.

The Russell 2000, -3% at 995.14.   Is struggling to hold the psychological threshold of 1000.  The Russell 2000 is -23% from its all time high just 7 months ago and hasn’t closed below the 1000 barrier since June 2013.

Mr. Market Needs a 3 Day Weekend-Stock Market BluesOil is toggling the $30 level, and many are concerned that if the $30 level breaks for both WTI and Brent Crude, and if $30 goes from being support to resistance, we’ll have a whole new level of uncertainty surrounding where the next support level is and how much damage is done to the Global Economy in a world of sub $30 oil.

We’ve seen great intraday swings in the market the last 2 weeks and with over 4 hours left in the day, a lot can happen.  It’s unlikely that traders will increase risk positions going into a 3 day weekend, but that could also translate into a short covering bounce before the end of the day.

The bottom line is:  with so many market indicators and indices at major inflection points, we have to expect a sharp break in one direction of the other before the end of the month.

The direction of Oil will likely have a bigger impact than Q1 earnings.

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