The stock market’s recent win streak was snapped by persistant selling that left stocks to close near the days lows with steep losses.
Sellers pushed right out of the gate from the few seconds of trading. Then as recent history has had it headlines surfaced that a meeting between finance ministers of the European Union originally scheduled for Wednesday was cancelled. That caused concern that officials might also postpone an EU Summit scheduled for tomorrow. The Wednesday Summit was expected to produce some firm details on what exactly is going to be done to improve financial conditions in Europe so this particular meeting had expectations. .
When no delays to the Summit were actually announced, traders then shifted concerns that the meeting may not produce the results wanted by the market. So then that prompted selling to lighten up on stocks. One can’t keep from drawing similarities to the afternoon soap operas on TV. If the feared problem doesn’t actually materialize then something has to be invented.
A far simpler explanation is that the US stocks market continues to be held hostsage by the European banking situation and any headline about that is capable of moving the market. Even more to the point is that traders took this time to take profits on the last 3 days up. The most recent couple of articles has pointed this out as a likely scenario. After todays trade the S&P 500 is right at the middle of the short consolidation that is forming after that very nice advance since the reversal day on October 4th. Looking at a chart of SPY the tradeable ETF for the S&P 500 you can see this is part of a much wider consolidation between $50 and $60. It are simply no apparent clues as to whether it will eventually escape above or below this range. For the moment technicals and inter market analysis weighs a bit more on the downside. But we trade along with the market itself and apparently European news and that can change any day.
On the earnigns front the majority of announcements reported better than expected results. Texas Instruments (TXN), BP Plc (BP), Coach (COH), DuPont (DD), Illinois Tool (ITW), UPS (UPS), US Steel (X), AK Steel (AKS), and Netflix (NFLX) were major companies or past market leaders that exceeded their numbers. Most however were down in price for the day due to the general market action. Mighty Amazon (AMZN), was down after hours for a miss in earnigns and guidance.
A special note on NFLX should be mentioned as it fell again over $42 to $76.71. Reports reveal NFLX lost over 800,000 subscribers after raisng prices adn attempting to break the company into two services recently. It is gut wrenching to look at a chart and see it was a $300 stock 2 months ago. If ever there was a lesson on needing a plan to trade a stock with a proper entry, target and stop, this is it. No doubt some novice trading accounts were blown up or eviscerated as the owners thought they were getting a bargain by buying a prior leading stock that has been in the news.
Sometimes referred to as the four horsemen: Google (GOOG), Apple (APPL), Amazon (AMZN) and Netflix (NFLX), for being strong leaders in the last advance, are now perhaps the four horseman of the apolcolypse in jest. All are having trouble finding their footing after pulling back which speaks directly to the quality of this market pul lback.
Crocs Inc. (CROX), a Colorado stock that suffered a similar fate last week made a wobbly attempt to gain some ground after its steep fall, but pre market gains were slapped down by the general markets pressure.
Over all advancers on the NYSE were 528, and decliners were 2504. The NASDAQ did not fare any better with 474 advancing stocks, and 2053 decliners.
On the economic news front the Conference Board released its October Consumer Confidence Index, which fell to 39.8. That missed in a big way the 46.0 that had been expected, and it was the worst showing in more than two years.
Trade with a plan.