30 Spanish Banks Downgraded by Moody's
The market turned lower yesterday, then for absolutely no reason, other than unabashed optimism from the bulls, the market jacked higher and erased all losses. Yesterday's swift turnaround is a constant reminder that buyers still dominate the long term trend.
Although the past four weeks have been highly volatile, and directionally mostly lower, stocks are only down 4% from the February high. If we were in week five of a bearish trend (long term trend) the indices would likely be down 10%, maybe 15%.
It is not to say the indices will not go lower from here, I prefer that they do, but the odds continue to favor that the bulls will take the indices to new highs this year. As such, and as painful as it has been over the past month, we need to keep focused on buying dips - and not selling rips.
Furthermore, the market has fended off terrible news over this brief decline. The Middle East and parts of Northern Africa have provided disastrous news. Riots and violence have resulted in thousands of casualties, and Libya is at the brink of a UN invasion.
Just as the market was stabilizing after the North African calamity, and becoming familiar with $100+ per barrel oil, the largest earthquake in Japanese recorded history hit the island. And although the Nikkei fell sharply on the news, and the yen rose, most global indices declined modestly and have already recouped their drop.
One look at the headlines this morning, and it's more bad news. UK retail sales declined 1% month on month. Portuguese yields on bonds rose to 6.8%, a level not exceeded since 1999. The Egyptian stock exchange was down another 6% and built on yesterday's decline. Moody's downgraded 30 Spanish banks citing real estate, economic growth and reserves as rationale. U.S. durable goods fell 0.9%, which is far worse than the 1.1% increase the economists predicted.
Yet, the U.S. market, most of Asia, and all of Europe look to post gains again today.
The bulls have been stopped by 1301 resistance this week, but if they take it back, I'm looking for 1335 and then it's off to fresh highs. Today could be a gap and crap scenario, but the bulls have proven their ability to fend off negative ambiance and move the indices higher.
