Reader Mail

That was a nasty sell-off yesterday. Volume picked up
and the advance/decline line was over 10 to 1 in favor of declining
stocks. I swear, my discussion of the Third Depression was purely
coincidental with the decline.

I received a ton of letters from Daily
readers, and I will share some of them
later in today’s letter. But first I want to take a closer look at
yesterday’s drop.

We’ve discussed at length the issues that are weighing
on stock prices: growth in
China, 2Q earnings, austerity
measures in
Europe, and new financial regulation. All of
these are seen as negatives for employment and the housing market, which
are the keys to economic recovery.

ADP payroll services said that payrolls rose
by a mere 13,000 in June, well short of the 60,000 economists had
forecast. Even though a large percentage of corporate CEOs have reported
they plan to hire workers, it’s not happening yet.

But as I’ve pointed out, economic recovery will not move
in a straight line. There will be bumps in the road, so to speak. I would
point out that this recovery is similar to the one from the 2001-2002
recession, which was often referred to as the “jobless

Data from the
European Central Bank showed that European banks will borrow far less
money to cover funding problems than was expected. Borrowing was $160
billion over the last three months, approximately 30% lower than what was

Now, for a little more on yesterday’s sell-off, I once
again turn to TradeMaster Daily Stock
. From his pre-market advisory to his

Why was I not worried?

Take a look at the long-term charts. Each week in my weekly video we look
at SPX and Nasdaq. In the SPX we watch the purple line for support and
for the Nasdaq we watch the green line for support. Neither was broken
yesterday. This is the same crap that happened last year before Q2
earnings were released.

I am not going on record and saying Q2 earnings will blow past
expectations and lead to a 25% bull rally in three months. Second quarter
results will likely miss analyst expectations. Stocks are pricing in that
miss right now, which does not leave a lot of downside later on.
Additionally, analysts have decreased estimates over the past month,
which will cushion the results.

As everyone knows, I expected more lows this summer. My big number to
watch remains 1019. Until it’s broken I must continue to favor the bulls
at this price level. While I do not expect higher highs anytime soon,
shorts are piling into the market and I believe the bears to be wrong and
will be herded into a “short squeeze.” If selling can push SPX through my
critical support, my secondary target takes that
U.S. index below 900, in
which case I will admit defeat and go bearish.

that of you didn’t pick up some shares of Citigroup (C:NYSE) last week
when I suggested, today is a good day to buy.

Now let’s get to some of that reader

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