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Well, we didn’t have to wait long. The markets have rendered their decision and quite frankly, have spoken and spoken loudly. After an intra-day attempt on Tuesday (July 11) to reverse the tide, which was attributed to some positive chatter out of Semiconductor manufacturer KLA-Tencor (KLAC), the masses bit hook-line and sinker and devoured the bait, which ignited a mini rally that would eventually fail in a horrible manner. During the next three sessions to close out the week, the Dow would experience triple-digit losses, something we haven’t witnessed in some time, while the S&P 500 closes in on its June lows and the lagging (or should we say leading) COMP finds itself piercing and probing its October ’05 lows. To say that the action this week was terrible would be an understatement. While the financial media will offer up multiple theories for the southside shuffle such as, heightening geopolitical concerns, oil percolating at all-time highs and uncertainty with respect to future monetary policy (interest rates), which all of these certainly do have some effect on the marketplace, they’ve all been with us for some time now and are old news. The bottom line is, there’s less demand for the supply being offered. So, what to make of it all? From a technical perspective, the markets are now flirting once again with their June lows and look awful to say the least. While one could argue that we now find ourselves in a short-term oversold state, just remember that we’ve yet to witness any sign’s of stabilization thus far. Furthermore, past experiences have taught us that both oversold and overbought tapes tend to travel farther than one anticipates. Thus, oversold can become more oversold, just as overbought markets can and often do continue higher than expected. Moving forward, unfortunately things don’t get any easier, as a plethora of Q2 earnings reports from US corporations are due in the forthcoming weeks. Therefore, it’s likely that both the “noise” and volatility levels will ratchet-up a few decimals and just be sure to not allow your emotions to get the best of you. For the less experienced, as well as those possessing a lower threshold for tolerance, the sidelines offer a safe haven until or unless clearer skies prevail. And for those who “feel the need for speed”, just be sure to have your risk parameters identified and adhere to such. Plan your trades and trade your plan!!
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INFORMATION The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
