The Greek debt crisis strikes again as Moody’s downgrades Greece’s debt to junk status. Stocks were enjoying solid price gains throughout the morning even as volume was running slightly higher. Volume was lacking the big thrust seen on powerful follow-through days, but it was running higher and with the price gains it did appear the market was headed to confirm the most recent run off the lows. It wasn’t until the Moody’s announcement did sellers take over and push down stocks. At the close the indexes were just off their lows, but suffered a high volume reversal ruining the mood on Wall Street. We still remain in a correction and the market continues to search for a follow-through day.
Financial stocks continue to be a major drag on the market as the financial reform continues to be unsettled. If it is anything like the reforms put in place in the late 30s it is sure to hit the banks hard. At this point the market continues to price in a negative outcome as they drag on the market. Without the financial sector at the very least moving higher will make it difficult for the market to confirm this uptrend.
Another blemish is the inability for the S&P 500 to regain its 200 day moving average. In addition to the failure of its 200dma the index also was unable to hold the 1100 level. A double whammy today as volume increased showing institutions weren’t too keen on accumulating shares today. Today’s action wasn’t positive and a look at the leaders it sure does look ominous. It is precisely why cash remains king and waiting for the market to confirm the upside is the best course of action.
A few market leaders, stocks who began breaking out last week as we moved higher pulled back today. A few were even negative on the day and others had reversed hard leaving the market leadership in question. The market can simply fix itself if we can reverse today’s selling pressure and push above key resistance levels. We still have major headwinds both technical and from an economic standpoint. However, the market is always forward looking. Perhaps the market can look beyond economic issues of Europe as well as the United States. The lack of clarity at this point from the market keeps cash a great place to be.
We’ll need to see a powerful rally with volume coming in much higher, not just higher than the previous day. A powerful rally will certainly clear out any doubts this market has presented us. However, the lack of conviction to the upside will confirm cash is indeed king.
Disclosure: No Positions