Spain and CMG... Stock Market Smacked Down...
Stock-Markets / Stock Markets 2012 Jul 21, 2012 - 12:43 PM GMTBy: Jack_Steiman
Sometimes there's an event that takes place to hit the markets in a negative fashion. Sometimes there are multiple things that occur that can bring a market lower. We saw it today in the form of earnings, the markets number one focus these days, and from news in Spain regarding more bailout talks and defaults. None of it is very good news, and thus, the market had a very bad day today. No fun.
Last night we saw Chipotle Mexican Grill, Inc. (CMG), a large and heavily weighted restaurant stock, say things weren't perfect. When you have a 55 P/E, and you say things aren't perfect, you can get hit. The problem is that not only do you get hit, but so does just about every stock in that sector, and many times, especially if the report was very bad, which it was. The entire restaurant sector bled out today. From Panera Bread Co. (PNRA) to Whole Foods Market, Inc. (WFM) to Monster Beverage Corporation (MNST), and everything in between. If you had anything related to food or beverage you were taken out and shot. Not fair ,but just the way it is for now.
The market in a foul mood these days when there's bad news on the earnings front. Throw in bad news from Spain, and you get what you get, a bad day for the bulls. No technical damage, but a bad day for the bulls, especially if you're in the worst of the wrong places. The charts will show you the lack of damage, but it doesn't make today any easier to deal with. Spain is now talking about needing more cash a lot sooner than thought. The nonsense there appears to be never ending. Their stock market crushed. This was the other culprit to today's bad day. Italy is also giving our markets trouble. Their market's down roughly 7%. That would be roughly 900 Dow points in a single day. So you can understand our rough day here.
In fact, it's amazing today wasn't worse. So a bad day, with no technical damage, but it did take the bears off the hook as the market was getting closer to breaking out. But in this market, you have to accept the bad times when all looks good as we are not in a bull market, nor are we in a bear market. When it looks bad we rally, and when it looks good we fall. Agnostic to nowhere in the big wedge. It was another meaningless day in the market, no matter what it may have felt like. Bigger picture nothing happened. Yet!
Lots of areas suddenly don't look as good as they did a few days ago. The banks, rocking late last week into early this week, have taken a huge hit these past few days. It's on the precipice of breaking below trend line support with no real support for a long way lower. The restaurants are now badly damaged. Nothing good is coming out of those stocks for some time to come. If the banks go, and then other areas start to go, and all that moves are some technology stocks, that's bearish bigger picture. We get earnings from Apple Inc. (AAPL) and Amazon.com Inc. (AMZN) next week, and if they're bad, look out below. If you lose the final leaders, the market is done. Amazon has a nearly 200 P/E. They better be perfect on their report or they'll be the next Chipotle Mexican Grill, Inc. (CMG)/NVR Inc. (NVR).
The risk there is massive. Can it go up 30? Yes, but can it fall 75? Yes! The same with Apple, although nowhere near as bad on their P/E. Earnings ultimately lead, and we need to see the best of the best come through. If not, it's trouble ahead. All eyes will be focused on the remaining big leaders to come next week and a bit beyond. The market can't afford technology to become like the restaurant sector.
Tonight you will see the charts. What they are telling you for now is that nothing is broken. Not yet. The long-term S&P 500 weekly chart wedge still in decent shape with no immediate threat to breaking down. The wedge is three years and four months old, and it's nowhere. Not fun hearing that, I'm sure, but when you see it you'll understand. So even with today's bad news, and poor action, the charts remain neutral for the moment. At some point in time, the wedges will get taken out, but that can be weeks, months or even years. The Fed is holding things up, while the fundamentals take things down. Nasdaq 100 3000 big resistance, while Nasdaq 100 2865 is huge support for the medium-term.
Keep it light.
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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