Anxiety Rises as Investors Doubt Growth
Last trading day of the week and investor fear has built to a point of uncertainty towards just about everything. Future growth of the economy is tops on the list. Economic data has been weaker, earnings have been a disappointment and inflation could be heating up. All the data added up to selling yesterday, but the bulls won’t die that easy. Watch support near the 20 moving average to hold short term and test. Investors are feeling their way through the maze and working out their anxieties.
Technology gets downgraded in the semiconductors and that created trouble as the sector fell more than 3% on the day. The break above 310 two weeks ago is now being tested with the index pulling back to that point on the close yesterday. The downgrades were on the assumption that growth globally will not measure up to expectations short term (sounds familiar). The leadership from this sector is now in question and it is something to watch looking forward. It could be the prelude to a broader pullback in the market.
The comments of dollar fobia picking up relative to a snap higher added to some of the confidence issues. They also rocked investors as they shift thinking towards a dollar rally and the potential ramifications. This pushed industrials, materials, metals and oil lower on the day. If the strong dollar trade gains any momtentum it would be negative for certains sectors and stocks overall. This would be the short term reaction, but the longer term outlook would be more positive for the economy.
We have to pay attention and listen to the economic data as it shows modest improvement in addition to modest disappointment. The data isn’t what sustainable and expanding recoveries are made from. This is in the back of my mind every day and that nagging thought creates doubt. Eventually the numbers bear out my concerns and the selling begins or the numbers improve and a catalyst is born to push the markets higher. For now it is in a trading range or decision making process. The hardest thing for you and I as investor is being patient. But, now is a time to practice both patience and discipline.
Today is expiration Friday and we could see additional volatility as we close out contracts and move forward. A pullback towards the October low is not out of the quesiton and in fact could establish a trading range for the broad markets as the recovery validates itself or the data validates the double dip recession theories running around. Either way a trading range is an option to another big sell off and test of old levels.
The give back yesterday puts us near even on the week and today settles the match. Dell’s earnings after hours is not helping with the futures down and the overhand of data from the mortgage foreclosures (1 in 7 mortgages behind or in foreclosure!). Revise your stops where necessary, focus onwhat you are attempting to accomplish with each position and manage your money accordingly. Don’t let the short drops influence your longer term outlook and don’t let the longer term outlook influence your short term plays. Stick to the why you bought each play. There will be plenty of opportunities as this story unfolds and direction defined.
Have a great day investing.
