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Markets Snooze After Dramatic Sell

The markets are holding the flat line on the day. Volume has dried up after the massive sell off yesterday. The SPDR S&P 500 ETF (NYSE:SPY) did over 370 million shares yesterday.  Today, a small 127 million thus far.  It is on pace to barely reach 200 million. The ADP Private Sector Employment report was brutal showing just an increase of 13,000 jobs. The market had expected an increase of approximately 60,000.  Even with this negative economic news, the markets barely dropped. After a massive drop like yesterday, the markets often go into pause, consolidation mode.  This appears to be the case today.  In addition, each day that passes this week gets the market closer to the July 4th holiday weekend.  The volume should lighten up more and more.  In addition, the markets are now turning their heads towards the Unemployment Report and Non Farm Payrolls on Friday at 8:30am ET. This will be a major report for this market.

Stocks are neither strong nor weak today at this point.  The one thing we need to watch going into the last few hours of the day is end of quarter selling.  Do some funds dump into the close as today is the last day of the second quarter of 2010?  It is always a possibility.

Two of the hardest hit stocks in the last two weeks are Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX).  These two have dropped well over 10% in just a the last seven trading sessions. The thought process is end of quarter window undressing.  Exxon and Chevron are stuck between a rock and a hard place.  They are down substantially on the quarter which means fund managers do not want to show them on their end of quarter statements to their clients, in addition, the association to the BP plc (ADR) (NYSE:BP) Gulf oil disaster is also causing funds to dump.  The drilling oil sector is very unpopular right now, and fund managers will do whatever they have to do to keep investment capital in their funds.

I expect a small rebound in Exxon and Chevron in the beginning of the quarter. Both have been hit harder than the overall market.  To get entries, guidance, swing trades, analysis and education, join the Research Center.

Gareth Soloway
Chief Market Strategist