We did not close at the high of the day.
The Dow rocketed up 350 points at the open but finished up "just" 290 points. There was an early morning shock as crude jumped $1.50, trying to follow the Dow's move but it quickly fell $3 from that point and "rallied" to finish the day flat with a $1.10 run in the last hour of trading which was utterly ridiculous and could barely be held up even in light post-market trading.
Here's our problem, we were looking for tech leadership to take us out of the doldrums based on the fundamentals of the sector but now an event that has nothing at all to do with fundamentals has rocketed the financials. We played the financials too but we've already seen how fickle they can be so it's not the sort of thing we want to base a market turnaround on. Yesterday was a worst-case scenario with money being pulled out of tech and put into financials. The Nasdaq posted a very pathetic 0.62% gain vs. the Dow resting at the 2.5% rule while the S&P and the Russell gained 2%.
BAC gained 7.8%, C gained 6.6% and even HD picked up 5.5% on housing fever but the fact that money will be available to buy housing, does not mean consumers are going to run out and buy them right away so let's not go too crazy here… The most interesting thing that happened today is that the LSE never came back up. Usually, on a big day like yesterday, London trades about 5Bn shares and yesterday only 1Bn shares were traded before the lights went out in the morning. It will be very telling to watch London in the morning, to see what traders are doing after a day of forced reflection.
Not that anyone cares about data but consumer credit for July dropped more than 50%, to 4.6Bn from $11Bn (which itself was revised down from $14.3Bn) which doesn't mean much but does show how quickly consumers reigned in their spending over 2 months (not good for CC companies). Tomorrow we get the dreaded July Pending home sales report – or lack thereof – at 10 am along with Wholesale Inventories. Wednesday is the oil inventory report that includes the hurricane but it's possible we'll have a build in crude as ships tend to rush to port ahead of a storm and we had plenty of warning on this one.
Thursday is a big data day with the July Balance of Trade and Aug Import/Export Pricing and the usual Jobless Claims for last week. At 2pm we get the Treasury Budget – or lack thereof – with a $105Bn deficit projected for Aug (not including GSE bail-outs). Friday we get the PPI for August with some relief expected from falling oil prices but August Retail Sales will be the big story that morning. Business Inventories come at 10 am.
I've decided to forgive the markets for not doing better today. GOOG and APPL remain under attack, the SOX are still performing like no one is going to buy an IPod or even a cheap phone for Christmas and, most of all, the I forgive the markets because the dollar jumped 0.68% and is now up close to 2% from last week. That means that what the S&P chart REALLY looks like is a gap up into the international 200 dma, which we finished above on a very strong session. GOOG is retesting it's July 21st International low which, priced in dollars, drives them 10% lower on the chart. We have to be very careful before we draw conclusions as to the performance of globally traded companies because it doesn't take much to knock 10% off the US value of a company based on dollar strength.
Despite the underperformance of the Nasdaq, they did close right at the international 200 dma – it's first test after a huge breakout in early August, any positive movement in tech will put us very short-term bullish but, long-term, we still have a lot to prove.
