Banks Lead the Retreat
Before I get into my daily market commentary, I wanted to remind you that tonight at 7:00 p.m. I will be hosting a free live chat event, "What You Should Do if You've Missed the Rally of 2012." During this free interactive live chat, I plan to discuss the market, focusing most of my time on the current rally.
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Now onto my daily commentary...
The market was finally able to crawl lower. But another huge surge by the bulls brought most indices back to flat for the day. So I am not sure I would call it a big win for the bears.
But the bears can claim a small victory because the bank stocks were murdered on decent volume. Total volume also increased yesterday, but it was markedly higher in the financial industry. Bank stocks were smashed by a percent, and the big U.S. banks such as Bank of America (NYSE: BAC), Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS) fell significantly more.
Over the past several months we have labeled the bank stocks as leaders of the rally. The sector led the charge higher on both the October and November bottoms, and it outpaced most other groups in the January/February market rally.
The lack of buying pressure in the bank stocks is noteworthy because very often leaders will flash topping signals ahead of the other indices. If that is the case, then the market should begin a retreat very soon.
I expect the retreat to be mild, and not very long in duration. But given the relentless upswing this year, the market may pull back and never stop its retreat.
While I strongly doubt that will be the outcome, we will look to the banks for guidance. Since bank stocks will likely top out first, they will also be the first ones to bottom out. If we start to see bank stocks stabilize during a broad market retreat (provided we have a retreat) then that will be a bullish sign to enter new longs in our TradeMaster Daily Stock Alerts portfolio.
Economic data starts to pick up the pace after going more than a week without much in the way of news. Yesterday retail sales missed growth estimates by a fraction. But today's industrial production and capacity utilization will likely have a bigger impact on the market should they miss at 9:15 this morning.
Also, Ben Bernanke's entire FOMC minutes will be unveiled today. Some traders read the FOMC to predict future Fed maneuvers, like QE3.
Last night Eurozone GDP was reported to have contracted in the fourth quarter, but the decline was slightly less than expected. The report showed a clear growth discrepancy between southern and northern Europe.
China pledged to help the Eurozone with its debt crisis and to support the euro last night. The news sent the Asian indices higher yesterday and most European indices, as well as the euro, are higher today. The optimism should carry into the U.S. indices this morning too, especially with the dollar pointed lower as a result of a strong euro and a weak yen.
