ECB Headline Knocks Sends Stocks Lower

The market was looking solid until the ECB headline on Greek debt.  Biotech stocks were hit hard to start the day with disappointing earnings set the tone for the NASDAQ early on.  The Dow Jones Industrial average erased early losses due to a boost from DIS after the company posted better than expected earnings.  Buyers were certainly out in full force by the afternoon pushing stocks to their highs of the session.  Even as 3:30 pm EST hit the market looked very bullish, but the ECB had other plans.  As soon as the ECB announced Greek debt was not acceptable collateral for Greek banks to hold.  Just as the headline came out sellers obliterated the day’s gain.  We still remain in a position to move higher, but our volatility continues to remain with us.  Our market model remains in neutral and will remain there until we get a direction from this market.

We certainly got a big surprise from the European Central.  Not allowing Greek Banks to hold Greek debt as collateral is certainly a big blow to Greek banks.  Imagine if US banks were not allowed to hold US Treasuries as collateral.  It would be a gigantic mess.  Whether or not this ECB decision will cause a big mess remains to be seen.  If this is going to cause further pain we will see prices deteriorate further from here.  Our neutral position continues to be the right call given the volatility and risks in this market.

Volume was mixed on the session, but higher on the NASDAQ.  IBD has yet to put the market in correction mode and shows the S&P 500 and NASDAQ with 5 distribution days a piece.  What has many confused regarding the trend of the market is simply the volatility.  Are we simply consolidating or churning.  Five distribution days certainly lends itself to more churn rather than consolidation.  Until we break out in either direction we simply cannot have conviction in any direction of the market.  When we do see the market breaks free in either direction we’ll remain in neutral mode.

We will remain patient with this market and disciplined.  Losing control here will only lead to heartache.  No need to be a hero.  Be a predator and await the prime opportunity to attack.  Stay patient.

View original article: 

ECB Headline Knocks Sends Stocks Lower

See which stocks are being affected by Social Media