Europe is at it again. Fears over a depression in Greece and Spain’s possible need of a full bailout helped spark fears over a European Union breakout. Right out of the gate sellers began to dump stock. However, before the first 30 minutes of trading were completed the market would find its bottom for the day. Volume was unable to eclipse Friday’s inflated volume figure due to options expiry, but the support at the lows was significant. Buyers were able to show up and support some big names like SNDK, AAPL, and GOOG. JPM even caught a bid. We’ll need to see some follow-through to the upside if we have any shot at recovering the losses today.
It was the big boys of the NASDAQ and the beaten down Money Center banks turning around the market today. AAPL reports earnings tomorrow after the bell and buyers were certainly in a hurry to hop into the stock when AAPL was near its lows. GOOG was able to recover its 200 day moving average after beginning the day below it. Volume was above average a sign Institutions are picking up the stock. JPM and BAC turned around their fortunes helping the Dow Jones Industrial Average recover from a more than 200 point loss at the open. The surge off the lows is bullish in nature and will only be negated if today’s lows are violated.
Europe remains a mess because they refuse to deal with their structural problems. Politicians are piling more debt into a system that is saturated with debt. It is equivalent to tossing a generic brand band aid onto a problem duct tape cannot fix. This is precisely the reason we continue to see more nations like Spain and Italy needing of bailouts. Headline risk is something that will stick with us for quite some time. Until debt liquidations occur and/or the ECB prints the heck of the EURO (a whole different set of issues) we’ll see these issues continue.
The beauty of a rules-based system is you do not have to worry about your emotions getting the best of you. We do not have to worry about headline risk as we simply will use our trading methodology to get us in and out of positions. At the moment we remain cash heavy because of our rules and not because we feel it is the right thing to do. When we do not have any signals to go long or short our cash position will certainly be large. Cash is king.