The back and forth whipsaw remains alive and well as we failed yet again near the top of some short-term wedges. The news that drove the market lower today came from the world of job creation, and showed fewer than expected. The market was dreaming of a number at 100,000, but it only received 84,000. Not horrible. Not worthy of a stock market annihilation, but worthy enough of a nasty day that saw man leaders get pulverized. It's a worrisome event. When a market is both overbought and flashing negative divergences on its short-term 60-minute time frame charts, you can't come in below expectations. If you do you feel the pain.
The market gapped down pretty hard and fell nearly two-hundred points at its low today, the Nasdaq 100 near sixty at its worst. The Nasdaq 100 always takes the hardest hit because of valuations on these types of days. There were never any real rally attempts, but in truth, there wasn't any gap and run event, either, when all was said and done. The bears couldn't find any real energy to bring this market to its knees as the day went along, thus, losses were contained mostly to the gap down event which occurred at the open. When all was said and done, it was another nothing day in a nothing market going nowhere for some time to come.
So what is the market holding up to some degree is what most folks are wondering about? There is just so much bad news from all over the globe, especially in Europe, where everyone else has plenty of exposure. We know most of the big-cap companies in the United States have loads of exposure in Europe. There are three reasons why this market refuses to, at this point in time, give it up in a big way.
The first reason is the big one. Never fight liquidity or better said, the Fed. Mr. Bernanke is pumping like a crazed scientist, refusing to allow the economy to fall apart, thus, has the machine turned on to full throttle. This is allowing the economy to hold up for now.
The second reason is also related to Fed Bernanke, and his intentional act of keeping interest rates near zero for many more years to come. Yes folks, years to come. This makes the stock market far more attractive to everyone. If rates shoot up, folks will leave the market and take what they can get without risking anything. Can't blame them. So he's protecting Wall Street through low interest rates. Again, years to come before interest rates go up because it'll be years before this crisis pass, maybe more years than we'd care to believe.
The third reason is Europe. They are in awful shape, to put it kindly. We, here at home, are in bad shape, but not in awful shape, and thus, folks are looking for the safest home, and it's sadly right here where things are just plain old bad.
So, those are the three reasons why the market is holding up far better than the fundamentals would suggest they should. Now, things are bad enough to prevent a blast up and out, but there are enough preventative measures in place to prevent the worst case for now.
The commodity stocks continue to get hit the hardest as it's clear deflation is the biggest problem. With jobs on the decline and with the ISM Manufacturing Report showing recession, there is less need for materials, thus, the struggle in the world of the commodity stocks. Gold, silver, and just about every commodity area, is taking on the look of bearish patterns in place. It can always change, but that's the real world as we know it in the moment.
Bear flags continue across the commodity world and if they get enough additional bad news, they'll be ready for yet another down leg. Some areas have already begun just that. The commodity world, however, isn't alone. There have been some very scary moves all across the market today from leading stocks in leading sectors. When you get a chance, take a look at some of these from today's action.
Informatica Corporation (INFA), VMware, Inc. (VMW), Citrix Systems, Inc. (CTXS), Cognizant Technology Solutions Corporation (CTSH), Priceline.com (PCLN), Google Inc. (GOOG), MicroStrategy Inc. (MSTR), Deckers Outdoor Corp. (DECK), Check Point Software Technologies Ltd. (CHKP), KLA-Tencor Corporation (KLAC), Navistar International Corporation (NAV), Walter Energy, Inc. (WLT), SPDR Gold Shares (GLD), iShares Silver Trust (SLV), Caterpillar Inc. (CAT, Cummins Inc. (CMI), International Business Machines Corp. (IBM), F5 Networks, Inc. (FFIV), Coach, Inc. (COH), Broadcom Corp. (BRCM), Lam Research Corporation (LRCX), and Cymer Inc. (CYMI), and many more.
What's troublesome is that many of these looked to have already bottomed, and then had these types of days. Is that a sign for what's coming in time to the whole market? It could be. It is definitely a negative to see so many leaders just get crushed.
The best place to look technically for what may be a problem is the Nasdaq 100, which is the leader of a healthy stock market. You want to see froth be bought at all costs. If froth is being sold, and thus, key support lost, you have to take notice. The Nasdaq 100 shows this best as there are three major support levels all within seven little points of each other. The 50-day exponential moving average is at 2899. The 20-day exponential moving average is at 2898. The top of the recent gap is at 2905. 2905 to 2898.
Seven points the bears want to see taken out, and the best way to do that, although not the only way, is on a gap down. We watch 2898 to be sure the market is holding where it needs to on a closing basis. Intraday is not relevant. As long as this level holds we're fine. A strong, clean break below would be bearish on a closing basis. Day to day as this market to nowhere continues to try and usually succeeds to frustrate the masses.