European fears spread fast and furious as the monetary union is struggling with its debt crisis
Stocks stumble on more European fears as the debt crisis worsens and spreads to more countries. In addition, China signal an interest to raise capital requirements once again to curb inflation in the mainland, but the move is likely to do very little to curb inflation fears. The market was poised to push back to Monday’s high, but sellers had other ideas. A few leaders held up, but the follow through we had been looking for failed to materialize. At this point, cutting laggards and taking profits are prudent moves.
Market leaders are important, but there is overwhelming selling pressure taking hold here. Today’s market proves we are unable to make any headway with the market. The EURUSD dove below its 200dma today is looking very much like it wants to head lower. The dollar index rose to end just below its 200dma, but the real story is the move in Gold and Silver. Fears over currency viability will be called into question and the support Gold and Silver are seeing are prime examples of the “fear” trade creaping back into the forefront.
Oversold markets can become more oversold and we are certainly seeing selling pressure continuing to mount. The lack of bounce from apparent good economic data should be a key clue the market had already priced in the good economic data and now has turned its sight on a potential collapse of the European Monetary Union. In addition, we may be seeing the market looking ahead to Austerity measures taken in America. The debt commission delayed its vote to Friday as members could not come to an agreement on measures the government needs to take. In our view it is quite simiple, low taxes did not create the problem, overspending did. Bring spending in-line and you will solve the problem.
Whatever the reasoning may be for the market’s action the importance is the market action itself. Market leaders had been signaling the market was fine, but with many coming under pressure as of late coupled with the weak market action a defensive posture should be taken. Leaders like APKT and OPEN are not the norm, but the exception now and is worrisome we can’t find more of these leaders holding up. Take your clues from your stocks and plan accordingly. This market does appear to be losing some steam, but listen to your stocks take the necessary steps to protect your portfolio.
One more note was the volume surge we saw at the end of the day as stocks slipped. It would have been a good thing to see the surge as the market pushed higher, but it appeard it was selling rather than buyers doing the bulk of the trading. Perhaps we’ll see the market rebound from today’s action, but at this point we would need a massive surge in buying activity to get this market moving again.
Always remember to cut your losses, but remember to take your profits when necessary!
