Europe Hits U.S Stock Market
Stock-Markets / Stock Markets 2012 Jul 24, 2012 - 04:30 AM GMTBy: Jack_Steiman
Europe hit the United States futures market overnight when deeper debt concerns became the talk of the world. Spain, Greece and Italy are having a very rough time of it these days with the concerns mounting over the weekend. All of these Eurozone countries are on the precipice of something no one wants to deal with on any level. It doesn't look like there's much anyone can do to save it, either, and that's where there's real problems. If the market feels there's an immediate cure from either the world banks, or a collective effort with our Fed Governor, then things won't be so bad from a market perspective. Clearly, that was somewhat the hope today as things could have been much worse than they were, especially when you look at the losses compiled overseas today.
We, here at home in the states, were nowhere as bad, which is normal since we seem to be the so-called safe-haven of the world these days. Shows you just how bad things are, folks. We're safe even though we're in recession. You have to love that. It's like politics, voting for the less evil of the candidates. You know no one is good, but you know you have to vote. Money needs to find a home with interest rates, intentionally, so low that our home seems to be the best in a bad neighborhood.
When all was said and done today, however, the charts clearly show no real technical damage was done. Short-term, yes, as there's now another gap down in the pattern, and a good sized one at that, but, in the end, there's gaps on both sides to protect. This will likely allow for continued back-and-forth to nowhere action. For the day, the bears feel good about themselves, although they could have done much better based on the severity of the news across the Eurozone. The bulls feel bad simply because the charts were starting to set up quite nicely for them only to see the carpet pulled right out from underneath. Have I told all of you, lately, we're on the road to nowhere!!
When news like this hits regarding the down turn in the Eurozone economies, and their inability to keep solvent, the sectors that usually get hardest for us are the banks and the commodity stocks. The feeling being that our economy will worsen, which will lessen the demand for goods, and thus, also lessen the demand for loans, and the like. That doesn't mean they're the only sectors to get hit. Far from it as the majority of stock sectors take some type of decent hit lower.
However, the focus has been, and likely will continue to be, those two sectors. Many of the stocks in the commodity world have had a good bounce off the lows, but the majority of them remain in their own bear market. Some are better than others, but a good deal of these stocks have only been able to back test the lowest moving average, which is their 20-day exponential moving average, where it simply fails out all over again. Bear-market behavior for the moment. There are enough sectors holding things up, where the whole market is far from being in a bear, but these sectors unto themselves, really are in bear markets. There is hope that some are trying to show some recent bottoming action. Stocks, such as Deere & Company (DE) , Caterpillar Inc. (CAT), and a quite a few others, and some of them held up quite well today, but it's way too soon to say they're out of the woods. It's best to stay mostly away from these stocks for some time to come, until they can prove that things are getting better technically.
So how does one play this market seems to be the number-one question, I have been asked over and over these past many months. There are certain realities about people who play this crazy game. Number one is most folks like action. The stock market really is just a big gambling hall. People who play want to be in the game. Unfortunately, for them, cash really is the best way to be playing this market simply because no one is in control, and there have been, and probably will continue to be, so many head fakes up and down. Having patience is probably the least likely virtue of the average trader and even many investors. However, that's the only game in town.
Amazing patience needs to be applied to your trading world, and sadly, most just can't do that. I understand it from an emotional perspective, but that's what all of you need to have, and probably will need to have, for some time to come. The more you do in an environment such as this, the more likely it is you will incur some serious losses. In addition, from an emotional perspective, if you have multiple plays out there, you won't have the patience to hang in there, if things go against you. Less is more in this market folks, like it or not. You should continue to follow that mantra for the foreseeable future.
Bigger picture support comes in off the 2009 trend line on the weekly chart at roughly 1270 on the S&P 500. We are still well above this important line in the sand for the bulls. For the bears, they have to watch the massive gap down at Nasdaq 100 3000. If the bulls somehow captured this level it's lights out for those bears. In between these levels it's really just a bunch of noise as the market tries to sort out what's coming down the road. Will the Fed save or not. Will Europe implode fiscally or not. Will the United States enter a shallow recession or will the Eurozone crisis make it a much deeper one. So much to be learned, and it wouldn't shock me, if we ultimately test down to that S&P 500 1270 area, but you never know what's coming down the road day to day.
Keep it very light would be my best advice to you. Nothing wrong with 100% cash if need be for a while.
Peace,
Jack
Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.
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