Big Worries at Big Banks
The market salvaged a gain yesterday, but it was an unenthusiastic win for bulls. Volume was up, but that was about the only good thing I could say about yesterday's price activity.
Banks and oil stocks sank and the rest of the market muddled through the afternoon in an uneventful session.
In the morning, pre-market, the indices were poised to record a huge (positive) day. And the indices, along with just about every stock (up to down volume 15 to 1) was up in the morning.
But the bulls could not hold onto the highs and the bears gradually pushed the indices lower, and briefly negative, for the remainder of the session.
Today is a very big day for the bulls, and anyone positioned long.
Over the past few sessions, maybe more, I've barked about how I think the downside is limited and the bulls should jack the market back to 1200 before any major push lower. I still think that's the case. And I intend on adding to our very empty TradeMaster portfolio today.
But my bullish stance will be wrong if the bulls cannot record a positive session today. And honestly, it needs to be a day where the indices pop 1-2% - more would be great.
If the bulls cannot jack the market today the bears will have every reason to retest 1100 this month. While there is very strong support at that price... I think sellers are strong enough to temporarily breach that support zone. And a break down through that level could be disastrous, a la May 2010, for the market.
Also, on the short term charts, Dow Industrials, Nasdaq and SPX have constructed dirty ending diagonal formations. An ending diagonal is a diagonal pattern that derives its name because it ends trends, and in this case the trend would be bearish.
If a strong short term (maybe more) bottom is going to be reached, there is not a better chance the bulls have than today, but I need to see convincing accumulation activity (high volume with price up over 1%).
The bulls will have help today from overseas. All Asian indices were up last night, with Hang Seng up nearly 2% after China's manufacturing data showed an improvement to 49.8 in August (anything below 50 indicates contraction). A Eurozone manufacturing index came in at 49.7, which was inline with expectations. So, both regions experienced contraction but on a relatively small scale, and not enough to cause a double dip.
Another news item, not a market moving one, but a good story nonetheless, is that Goldman Sachs and the Vampire Squid leader himself, Lloyd Blankfein, hired fellow money sucker and defense attorney, Reid Weingarten yesterday in a move that could indicate expensive trials are about to begin. Big banking stocks like JPM, C, BAC and WFC sold hard in recent weeks. Some of that was market related selling pressure, but maybe big banks are about to be taken to court.
U.S. economic announcements are weak today, and the decent economic news from Europe sparked a 1% climb in the euro. The corresponding fall from the dollar should give the U.S. indices at least a 1-2% pop this morning. But tomorrow, U.S. durable goods is announced, and that will be an important metric, and one that could impact the policy decisions of Bennie and the Feds at Jackson Hole this week.
