Early morning futures suggested a positive start to the day and buyers were more than willing to bid stocks higher. At its highs the Dow Jones Industrial Average was up more than 282 points on the session. Volume was running hot and it appeared as if this market was going to make a run for new highs. Sellers had different plans. It would not take them too long to erase the morning gains and send all the major market averages into negative territory. Quite the turn of events for those who were out in full force on Twitter and Facebook buying the dip. How quickly did their confident tweets and posts disappear with the violent shift in momentum during today’s session? The more volatile this market gets the less confidence one can have going in either direction. We remain in our neutral stance and will proceed with caution.
The easy scapegoat here is crude oil and its fall from $107 a barrel to $46. Other commodities like natural gas and copper have fallen from grace. Today we saw Crude hit a 44 handle, but recover and turn green for the day. We will let the so called experts at CNBC try to sort out the “why” and we can focus in our price action. The increase in volatility and the market’s inability to hold onto gains does not leave one with confidence we can push higher. Not to mention what we have witnessed appears to be more like churn than anything else. This market needs to shape up quickly for it to have a shot at pushing higher.
Earnings season has kicked off unofficially with Alcoa (AA) posted earnings after the bell Monday. Bank earnings are on deck. AA stock did not react well after earnings erasing all the day’s gains and then some. Major money centers like JPM, BAC, GS, MS, and WFC have not been performing well as of late. Maybe earnings will turn these stocks around, but their recent action has suggested otherwise.
Tomorrow is a new day and another chance for this market to make a turn and help vindicate dip buyers. Bottom line is to have a cut loss strategy to avoid major drawdowns. Stay the course.
