More hope and change rhetoric from the Eurozone helped boost stocks at the open. Stocks shrugged off a worse than expected reading from ISM non-manufacturing index as well as factory orders. Zooming to new highs on the day it appeared the major indexes looked to retake their 200 day moving average. Volume on the day was running well under Friday’s level suggesting institutional buyers weren’t too excited to scoop up shares of stock. Rumors turned to headlines S&P put nearly the entire Eurozone on credit watch. Fifteen out of seventeen countries were on S&P’s list. Stocks reacted negatively to the headlines, but were able to push just off the lows. The selling helped push the run rate above Friday’s level. Today was the second straight day of stalling type action, but we still are looking for a follow-through day.
The market is nearing over-bought territory without notching a follow-through day. Tuesday’s session will be day 7 where we are looking for a confirmation day. After day 7 follow-through days tend not to produce big time winners and even strong market uptrends. However, any trend here would be welcomed! The whipsaw action in the market has made it difficult for trend followers to make money. This has been one heck of a year for trend following as it has been difficult for the market to sustain any trend in any direction for any period of time. If you have been quick to take profits and cut losses you should be doing well! The key: have a game plan on what to buy, how much, where to cut your loss and where to take your profits!
I find it interesting the market pundits are trusting of politicians here. Europe’s problems aren’t extraordinary by any stretch of the imagination. Removing emotion, they have simply run out of other people’s money. To fix this issue they need to curb spending. On the revenue side, don’t they already tax everything? However, it won’t come as a surprise if this latest European summit fails despite the need to “save” the status quo.
Keep it simple stupid. It really will do you a lot of good in trading. Ignore the news. Ignore CNBC, BLOOMBERG, and the rest of the financial publications. They are out there to sell you something!
Cut your losses!
