Despite a disappointment from the ADP Employment report the market received good news as second quarter GDP came in at 4%. The GDP figure came in well ahead of expectations pushing futures higher prior to the market open. Unfortunately, the highs set in the morning could not hold even with the Federal Reserve committing to keeping rates low a considerable amount of time after QE ends in October. NYSE volume rose on the session while NASDAQ volume fell. Given the lack of price movement within the indexes on the NYSE it confirms our view we are seeing this market churn. It could very well turn out to be consolidation and we’ll simply readjust. However, at this time there is mounting evidence we are on the verge of, at the very least a small correction. We are positioned according to our plan dictated by the market price.
After the market close we received word Argentina would default on just over one billion dollars in debt. While there will be focus on the default as well as Middle East tensions and the situation in Ukraine there is one area of neglect. Europe continues to move lower and while everyone is concerned with other issues Europe may very well become front and center again. Check out the DAX and CAC leading the way lower.
While Europe may be a catalyst to move lower we continue to have earnings push stocks. Tonight we had a few earnings movers like AKAM and YELP. AKAM earnings report was met with disappointment as the stock gapped lower by 5%. Perhaps it rebounds, but it is disappointing as the stock had potential to be a buyable earnings gap tomorrow morning. YELP initially moved higher after it reported earnings. Sellers quickly ran to the stock pushing it below the close ending the after-hours session down 1.38%. Another sore spot was GRMN which initially gapped to the upside on earnings only to close more than seven points off its high. Then you have BWLD getting crushed after it guided lower. It has not been all peaches and cream for earnings season and with the current market churn caution flags are up.
There are other red flags being flown by the market like advanced/decline line and internal divergences. We’ll touch upon those soon, but what we are seeing from the stocks we follow and market action this market is not likely to head higher. We still have $25 billion coming each month until the next Federal Reserve meeting yet this will end completely in October. This market could be adjusting for life without QE. It is anyone’s guess at this point and we’ll certainly find out soon. For now, we must obey the market action and what our signals tell us we must do.
