Traders were focusing on economic reports and it kicked off with jobless claims. The market was dealt a blow with economists were expecting to see claims figures down 475,000, but claims rose to 500,000. Futures reacted negatively, but the market was waiting on the Philly Fed index and leading indicators. Stocks began to make a move lower ahead of the release suggesting a surprise to the downside. The surprise was the drop in the Philly Fed index dropping to a negative 7 reading showing a slowing in growth. Dropping like a rock the market plunged to the lows by noon time and found a bit of support late in the day. However, the last 30 minutes of trading sellers took over again sending stocks near lows of the session. Volume swelled across the board as institutions stepped up and sold stock. Today highlights the fragile state the market is in and cash remains king.
Economic data has continued to plague this market as corporate earnings has been good. Unfortunately, productivity and cost cutting have helped the bottom of stocks, but not for the average consumer. This trend will likely continue as the climate has yet to adapt to the changing landscape. We can argue all day long about the roll of government, but so far the stimulus package passed in 2009 has failed to spark long term stability. The stock market while in a fragile state will at some point produce solid gains, but until we get big accumulation we’ll just have to wait patiently.
Once again banks had issues today with the XLF reversing on big volume. Without financial stocks at the very least stabilizing and moving higher this market will have a terribly difficult time moving higher. While the banks were the group of stocks who took us higher since March 2009 they are now leading us lower. We’ll need to see a big reversal in the financials to see this market sustain a move higher.
An interesting development today was the put/call from the CBOE finishing below 1.0. Quite surprising given the thirst for index puts over the last few months. It could be an anomaly, but shows the lack of panic the market displayed today. Fear did creep back into the market as the VIX jumped nearly 8%. The move was today was quite bullish for volatility index and is hinting at lower equity prices ahead.
We do have top quality stocks holding up during this period, a positive sign for when the market turns. Cash remains king and when this market does turn we’ll be able to take advantage of the move.
Disclosure: Long PWER