Another Oversold Bounce?
The market is getting a boost in early trading, which is pretty good considering the early news. Asian markets plunged overnight as the subprime news made its way across the pond. One Australian hedge fund has gotten hit, and one of Japan's biggest banks is reporting losses as well.
The economic news was good, with the core CPI coming in at just +0.1%. The 10-year yield is down slightly to 4.73%.
Tech stocks are mostly weaker after disappointing guidance from Applied Materials (AMAT). But financials are higher, even in the face of a big Countrywide (CFC) downgrade.
The markets have gotten oversold again, and are due for a bounce. The last time we were deeply oversold, we saw a pretty strong 3-day, +5% rally. But then when the markets came back down for the retest, they undercut the previous lows.
Sometimes this is how the pattern plays out. So no we have to again wait for a bounce, and then see if these new lows hold on the next retest. Obviously, this process takes time so investors need to be patient and not try to force things.
With each level the indexex move lower, they leave behind more overhead resistance. But eventually the news gets priced in, everyone who wanted to sell has done so, and a new uptrend can begin.
If the Fed ever comes in and cuts rates, that would ignite the market. But for now, this is still wishful thinking.