Banks Lead Market Sell-Off
The market slumped lower yesterday and the bulls lost their four day winning streak. Volume was low in the decline, as it has been for most of the week.
Financials were the big losers yesterday; bank stocks, including Bank of America (NYSE:BAC) JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) were all down more than 3%.
The Nasdaq led the indices lower and closed down almost 1.5%. The selling in the Nasdaq was highlighted by Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT), down 1.5%, while Apple (NASDAQ:AAPL) and IBM (NYSE:IBM) also fell 1%. At this point it doesn't look like a major top formed yesterday, but the indices may need additional consolidation early next week.
The 1220 resistance zone brought SPX to a grinding halt this week. The bulls had many opportunities to tear through that resistance zone. But as I mentioned in great detail Tuesday, and throughout the week, that for a variety of reasons I find it hard to believe that the wounds inflicted by the bears earlier this month have fully healed. And I do not think the market is ready to blast beyond 1250.
The bulls are going to need a major catalyst, or a slew of minor ones, to jump beyond 1250 resistance. Already looking into next week, we have the jobs announcement from the president, which could be a major catalyst.
We're also expecting a slew of minor catalysts like euro zone GDP, Australian GDP, U.K. GDP, Japan GDP, a rate decision from U.K., a rate decision from Canada, China CPI and the Fed Beige Book.
Today is also an important day since we will get a good look and the employment levels in the U.S. Nonfarm payroll and the unemployment rate were released this morning. The results were no jobs added in August and steady 9.1% unemployment, which is below the estimate of the 65,000 jobs analysts expected. The jobs data is not going to help the market this morning.
The bulls will not have any help from Asia today where stocks sank almost 2% on average. And in Europe, most indices are down over 2%. Oil is trading lower by 4% and gold is the only major asset class up, by 2.7%. Although I began a put position on SPDR Gold Trust - ETF (NYSE:GLD).
The bulls are on their own this morning, but 1197 should be good support. And 1175 is a must hold today as well as next week.
One area of the market that could provide cheap stocks is Brazil. The market in Brazil has sold hard for a year, but the government cut rates yesterday morning to boost the economy. Watch stocks like Petroleo Brasileiro (NYSE:PBR), Gafisa (NYSE:GFA) or Gol Linhas Aereas Inteligentes (NYSE:GOL) for potential bullish trades this week.
