John Chambers the CEO tells it like it is and unfortunately for those long CSCO paid the price today as the stock was down more than 8%. Once again, for the second day in a row stocks found themselves support at the day’s low. The S&P 500 briefly breached Tuesday’s low, but the NASDAQ was able to hang on and hold Tuesday’s low. Volume was above average as it appeared institutions were quite active in the market. QQQs were off in sympathy to CSCO and PCLN earnings and tomorrow will usher in another day of fun.
The Dow Jones Industrial average has finished lower 7 out of the last 8 days and it appears given the after-hours action it will go for 7 straight down days. However, it is not a reason to say we are going to go higher or lower. There is always the possibility for the index to continue lower. Use a solid discipline to trade this market and not one based on feel. Have a plan and execute it.
Europe continues to be on the forefront of everyone’s mind as the entire European Union hangs in the balance. As last night’s commentary stated Germany should be the ones to leave. Why should they be held accountable for bailing out the rest of the union? Nevertheless, you are going to continue to see much stress placed upon the entire union until the debt outstanding is liquidated to a point where countries are able to service the debt. In addition, spending must be brought in line with revenues as to not add to the current debt load. Will Europe be able to break away from its current nanny state and reduce its spending? Luckily, the answer is no and we have price to guide us in the market.
Unfortunately the wild card to all of this happens to be the world central banks. Given the current correction and the need to bailout Spanish banks (Portugal and Italy will be next). How will the central banks coordinate an effort to do one massive bailout nationalizing all banks in the European Union? It is highly doubtful Big Ben Bernanke and the rest of the Central Bankers would allow the market to head into free fall.
We are living in the ZIRP/QE world where anything is possible. Cut your losses short and no matter the nonsense occurring around us will simply be background noise.
