The story of the day was the bank downgrades after the market closed. During the market session BAC broke through a key pivotal point and continued lower in after-hours. Technology stocks were the ones hit hard during the trading session as stocks like GOOG, AAPL, AMZN, ADBE etc pushed the NASDAQ lower. Leading the charge lower was small cap stocks as they continued to lag the broader market. Today’s market session is very telling as to the strength of this market. We are looking for a reversal to the downside with volume as a key indicator to get short.
Our trend is down, but it can be broke with a reversal to the upside with volume. Of course, this is not what we are expecting as this market continues to show it is very weak. AAPL couldn’t even muster back to back days of gains. AMZN appears to be heading down to much lower prices. PCLN is another stock running into strong resistance at highs. These big technology names have been the stalwarts of this market and when they are struggling it is time to take notice. Be prudent here, this market is weak.
The debt crisis happening in Europe will make its way over to the side of the pond. S&P has already downgraded the United States and Fitch has put our country under review. We’ll see another debt ceiling debate here soon as we continue to be unable to come to an agreement to close the budget gaps. Both sides of the table need to get together and solve the issue. What a great time to usher in a more simple tax code, make government efficient (via six sigma, LEAN), and reigning in entitlement spending. Seems easy, why can’t they get it done?
All of this is complete noise when it comes to trading. Look at Paulson’s hedge fund products down over 35%! He makes macro “bets” and when you are wrong and you can’t cut your losses you pile up huge drawdowns. Maybe his brother should have helped him out this time!
Financial stocks continue to look really, really weak. BAC is the weakest amongst the financial stocks. The stock is acting like the bank is about to go under. Don’t be a hero trying to catch the bottom in financials, you’ll get burned.
All the best to your trading!