Yesterday, stocks started with a nasty gap down and ended even lower and at the lows of the day. The lower opening was in reaction to a sell-off in Europe. And the subsequent decline was mainly attributed to the absence of detail on the plan to save the European Union from its financial woes.
As distrust mounted, the U.S. dollar rose against most world currencies, but especially against the euro and the yen. Reports of a Greek referendum on the European aid package and a planned vote of confidence for the current government sent waves of fear throughout the investment community that the entire deal was coming apart. On top of that, Japan unleashed a massive intervention to weaken the yen. It is reported that Japan bought over $90 billion dollars, raising the dollar to Y78.18 up from Y75.83.
The high-volume buying on Thursday was followed on Friday by light trading within a very narrow band as investors contemplated the European bailout deal. Thus, instead of a bullish follow-through, the market paused. And yesterday, sellers reversed the near-term trend by turning down from the line connecting the July highs and collapsed through the 200-day moving average and then the neckline at 1,260 — both major support lines.
This inability to move against the resistance starting at 1,290 is not a good sign for the bulls. And in response, the internal indicator (stochastic) flashed a sell signal.
The bulls have to get their act together and mount a high-volume assault on each of the barriers that they lost yesterday. If prices fall below the support at 1,230, we could be mired in the old 1,100 to 1,230 trading zone for many weeks.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
