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Market Proves to Be Fearless – But Will It Last?

Keep your eye on S&P 1,300 as an indicator

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If we glance at the broad equity indices such as the S&P 500 INDEX, RTH and Dow Jones Industrial Average, yesterday’s trading session was fairly uneventful despite a barrage of random news hitting the tape.

Stocks remained relatively sticky so much, in fact, that not even news of Moody’s downgrading Ireland’s debt to to Ba1 outlook negative did much to stocks relatively speaking.  On the other hand, one could say that stocks closed the session at their lows (financials and semiconductors closing notably weak) and defensive stocks again outperformed, as did bonds and even gold and silver rallied.  And while the Ireland downgrade was in the cards, one needs to keep in mind that just two years ago that country was rated AAA by Moody’s.

But these broader “issues” like Italy and the U.S. spending habits including won’t matter until they start to matter. That is to say they do, of course, matter now, but clearly fear hasn’t spread anywhere near where it could be and stocks remain well bid for now.

Is it denial, carelessness, or outright ignorance on the part of investors not to dump all and everything in their portfolios with even the slightest insinuation of risk on the open market?  Whatever it is that is making investors believe for another day, we will be there when things do turn lower and will then try to navigate these waters with the appropriate strategies.  My job as a trader is not to second guess the market or trade a market that isn’t.  My job is to take one step at a time, one day at a time, manage risk, and at the end of the day end up with a little more green in my jeans than the period prior.

Let’s have a look at a few charts shall we.

The Nasdaq 100 has now corrected close to 3% over the past three trading days, which I would classify as a healthy correction and could envision it regaining better footing again soon for another push higher.  As I usually point out in connection with this index, stocks like Apple (NASDAQ: AAPL) acting well is a good sign.

ndx nasdaq 100 index

The next chart to look at is gold again.  I pointed this chart out yesterday and discussed the potential of a break out of the gray zone on the chart.  Yesterday gold then proceeded to do just so and as a next hurdle it has to contest with the highs from the breakout fake out from early May.

gold futures


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