Crisis in Egypt Continues as Stocks Consolidate Above Key Levels

ADP Employment index took center stage after the market received a jolt of buying on Tuesday.  Disappointing investors December’s ADP Employment index was revised down significantly throwing caution to the employment winds despite the index’s gains.  The day saw the NASDAQ hang in a relatively tight range with the S&P 500 keeping above its 1300 level.  Much talked about Dow 12,000 was able to hold today as well.  Volume fell more than 10% across the board as the 2000 mile storm disrupted much of the United States.  Considering the weather the market was able to find support at its lows and avoided the dreaded roll over.  A good day of consolidation, but the market will look towards Friday’s job report.

Hidden underneath today’s action was the movement in yields and specifically the 5 year treasury yields.  At some point the Federal Reserve will not be able to fend off market forces pushing on yields and they will move higher.  At some point the United States will have to deal with its debt and will have to begin to endure some pain with reduced spending.  Most notably, Federal and State pensions along with Social Security, Medicare, Medicare, and defense spending will be cut.  We may have to endure some pain, but the American spirit is great and we can overcome.

Check out the charts on the 5 year and 10 year treasury yields:

We are seeing top quality stocks breaking out as earnings are released.  Last week with AMZN MSFT releasing disappointing results we have BIDU, NFLX, APKT and a few others challenging superior earnings.  There have been far more positive earnings reports than negative ones.  While we do not gamble on earnings, it is certainly a positive for this market.

Last week we did see the number of AAII bulls drop from 50% down to just above 40%.  In addition, bears were able climb back above 30%.  It appears as if the recent pull backs have scared the bulls a bit here.  Whether or not this is foreshadowing a market pullback we do have 4 distribution days hanging over the NASDAQ.  Any further professional selling will certainly send this market into a deeper correction.  Pay attention to the price and volume action of the market rather than trying to pick the top with sentiment – your stock trading tip of the day!  Other stock market tips will continue each and every market commentary!

As always, cut your losses short and use price and volume action to your advantage!