Debt Ceiling... Necessary Ingredients... Stock Market Nervous....
Stock-Markets / Stock Markets 2011 Jul 19, 2011 - 02:00 AM GMTBy: Jack_Steiman
Sometimes it's tough to write a newsletter. In times such as these, you can basically throw out much of what I'm about. The technicals are my world, and that's tough enough at times, but when the market becomes a political task, you just throw up your hands and say it's beyond me. It's beyond all of us. The market sitting and waiting on news each day about whether the debt ceiling will be raised, and if it is, will whatever makes it up be enough to satisfy the rating agencies so we don't have financial crisis part two. So much for every citizen of this country to be worried about as the financial stocks continue to set new yearly lows day after day. Each and every day we all hope to hear that our two sides can work together and give in enough to satisfy what it takes to keep this country from a massive embarrassment. The pain to be felt from a downgrade of our debt rating will be more than substantial. Heartbreaking is probably the better word. Too many will suffer unnecessarily as you'd think the two sides would understand what's at stake here.
Maybe they don't care. Maybe their egos get in the way more than it should, and thus, we all pay a price we shouldn't have to. So hard to grasp what's going on because it seems too simple. Do whatever it takes for both sides to get it together. One side needs to accept higher taxes for the very wealthy. One side needs to accept that only massive spending cuts will be acceptable. It is what it is boys and girls, now go get it done so we can all move on with a lot less to worry about. How they could let another weekend go by without coming to a positive resolution is beyond my understanding, but that's what happened, and that's why today happened in the stock market. Message sent. It could have been worse, but I think the message should be clearer today that it was before the weekend began.
The financial stocks are taking it on the chin in a very big way here. Carnage is the word for the day. The financials continue lower, making a new low for the year today. Nothing heavy on the volume side thus there's hope that the right news could right the ship, if not just temporarily at least. No one is going to run in and buy those financial stocks if something is looming over their heads, such as we are dealing with now. The wrong decisions by our leaders could send those stocks to their graves in a hurry, and therefore, these stocks are not being gobbled up even though they are getting cheaper by the day.
The risk is just too high. If you want massive risk, go buy yourself a load of those stocks and hope the right thing gets done. A strong relief rally would take place at the very least. I'm not suggesting hanging around if that rally takes place, but you'd get the rally nonetheless. However, understand the risk involved, which is huge. Thus, if they continue lower because neither side is doing the right thing. It's best to stay out of the way of these headaches until things get resolved one way or the other. Bottom line is the weakness continues, and as Geithner said today, the wrong circumstances would be catastrophic. Stay clear of that potential would be my best advice.
Earnings season is upon us and it's a big week for the market on that front. Tonight we have earning's from powerhouses, such as Wynn Resorts Ltd. (WYNN) and International Business Machines Corp. (IBM). Two big leaders. Sadly, great reports from some other stocks recently have not helped the market move higher as its focus is on the debt ceiling and almost nothing else. However, when the market is nervous, it doesn't need other headaches such as important leaders not making their numbers or worse yet, lowering guidance for the next quarter. These stocks are being watched closely tonight but it doesn't end there. Later this week we see numbers from CSX Corp. (CSX), The Coca-Cola Company (KO), Chipotle Mexican Grill, Inc. (CMG), Bank of America Corporation (BAC), Goldman Sachs (GS), Harley-Davidson, Inc. (HOG), Apple Inc. (AAPL), Johnson & Johnson (JNJ), Intuitive Surgical, Inc. (ISRG), Wells Fargo & Company (WFC), and Yahoo! Inc. (YHOO). Leaders abound and they need to overall come in with good guidance. These stocks mentioned are for Tuesday alone.
On Wednesday we get F5 Networks, Inc. (FFIV), EMC Corporation (EMC), American Express Company (AXP), Xilinx Inc. (XLNX), eBay Inc. (EBAY) and QUALCOMM Incorporated (QCOM). Thursday we see Microsoft Corporation (MSFT), Morgan Stanley (MS), Danaher Corp. (DHR), Whirlpool Corp. (WHR), Freeport-McMoRan Copper & Gold Inc. (FCX), AT&T, Inc. (T) and SanDisk Corp. (SNDK). Much will be understood about what the big leaders of this country are thinking about their futures. More than interesting. they better be good overall, much the same way Google Inc. (GOOG) was.
So the S&P 500 is now six points below its 50-day exponential moving while the Dow and Nasdaq were able to tail up late and close a drop above that critical moving average. Nothing to be excited about if you're a bull. Yes, two of the three index charts held but it wasn't exciting to see the S&P 500 lose it by a few points. At least it closed off the lows. At one time it was exactly 1% below. All is not lost for the bulls here. The market is trying to hang in there as bad news swirls all around, especially from the financials.
With things as dire as they seem to be on so many fronts, you have to say not bad with regards to how the market is holding up. It appears the market is simply waiting for the right news to come out to take things higher. No guarantee we'll get that good news in the near-term. maybe not in the long term either. I wouldn't be betting heavily on the market either way here. If the Dow and Nasdaq join the S&P 500 in moving well below their 50-day exponential moving averages, things will look darker for the bulls and a lot brighter for the bears. It's really about the news of the evening, and then the futures reflect what takes place overnight. Both sides of the world need to get it together and sooner than later.
Peace,
Jack
Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.
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