A Rare Third Down Day
Markets are lower in early trading. Yesterday the markets recouped some of their early losses but still closed lower on the session. A down day today would mark the third consecutive loss for the S&P 500. While that doesn't seem like much, if you look at a chart of 2013 you'll see that three down days has been very rare.
Earnings season will start to slow down, but there was still a large wave of companies reporting last night and this morning. So far I am seeing more negative reactions than positive ones.
Stocks rising on earnings: EOG, TWX, AOL, WCG
Stocks falling on earnings: DIS, RL, SBGI, Z, XEC, NICE, LQDT, STE, CLH, CHRW
Asian markets were lower overnight. Japan plunged -4.0% on a stronger yen. New Zealand's unemployment rate rose to 6.4% from 6.2%. Separately, Japan's PM asked the agency responsible to stop the leaking from the Fukushima nuclear plant. The govt said about 300 tons of contaminated water gets into the ocean on a daily basis. Doesn't this worry anyone else?? I might have to cut out that Japanese mackerel at sushi.
Europe's markets are mixed. Germany's industrial production rose 2.4%. And Britain gave guidance on monetary policy for the first time and said rates will remain low until unemployment falls to 7.0% (it is currently 7.8%). The BoE also raised 2013 GDP guidance forecast to 1.5%.
The dollar is lower today and commodities are mixed. Oil and gold are both up fractionally to $105.40 and $1283, respectively. Copper prices are lower while ag prices are bouncing.
The 10-year yield is easing back to 2.61%. There has been more chatter about a September taper recently, but the 10-yr yield has yet to breakout above that 2.75% range.
The volatility index is on the rise again, up 8% to 13.75. It is up over 15% in the last 2 days since we highlighted the 12 level as a potential bottoming area.
Trading comment: The market is up a lot ytd and has not had a 10% pullback all year. That doesn't mean we need to have one at this juncture, but a correction here would be healthy for more gains down the road. The S&P is currently lower for a 3rd day. I would not be surprised to see dip buyers step in and help the market bounce. Some technicians are watching the SPX 1684 level for near-term support. We touched that level this morning. A likely pattern that could emerge would be a low volume bounce from here for a few days but then a deeper correction as we get into August. We think investors can be patient in the near-term.
KAM Advisors has long positions in EOG, DIS