A News Rich Friday
Thursday Recap: Major stock market averages broke through near term support on Thursday as averages declined between 0.8% and 1.0%. The S&P500, at 2095.84 and DJIA at 17,905 closed below their recent Round Number Support levels of 2100 and 18,000 respectively.
NASDAQ at 5059 could not escape the selling, and also broke from its very tight pattern of the last 3 weeks.
DJ Transports at 8536, -0.85% snapped a 4 day winning streak as both airlines and rails traded lower despite a 3% drop in Oil.
There was one perplexing question at day’s end. The early selling in Eurozone stocks and US stock futures was clearly fueled by a third day of heavy selling of Sovereign debt in the Eurozone, as the benchmark 10 year German Bund nearly hit 1.0% in early trading Thursday.
By midday in New York, bond markets in both the Eurozone and US markets had reversed, and eventually closed with half point gains on both the Bund and the US 10 year. A truly healthy stock market would have followed suit and traded higher after the bond market reversed. Not even close. Stocks closed near their lows of the day with DVOL 6x UVOL and decliners led advancing issues by better than 3 to 1.
Stock Market News or Profit Taking? Which Caused the Selling?
It certainly felt like Investors were looking for a reason to sell the market hard for at least 1 full day, despite a midday bond market reversal. The real test for the market could come in the days ahead as there are still numerous unresolved issues facing investors as we approach the end of the second quarter.
This morning’s OPEC meeting appears to be a low impact item, pending a 10:00 AM press conference.
The “official” production target remains 30 million barrels, as the Saudi’s remain more concerned with market share than supporting higher prices. Oil is largely unchanged after a 3% drop yesterday.
The May NFP report came in a bit “Hot” this morning at +280,000. That’s 1 more data point showing an economy doing slightly better than expected and could continue to put mild pressure on the bond market as the US 10 year is testing the 2.40% yield metric, which was the support level bonds rallied off yesterday morning.
The Early Line: Stocks will no doubt start the day under pressure. Your trading game plan should include some ideas that look to buy a test of yesterday’s low in strong stocks.
Keep a close watch on the financials, particularly the big banks, and the technology space.
Banks and technology were 2 of the stronger sectors during the last 2 weeks, and with the market desperately in need of fresh leadership, any sign of an early selloff stabilizing will likely come from these 2 market sectors.
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