Daily Market Update – July 28, 2015 (9:15 AM)
Yesterday was another in a series of down days and deteriorating internal metrics.
That latter part refers to the mix of up and down stocks and the relative number of new lows to new highs, as well as other indicators that are all pointing to a loss of optimism.
If earnings can’t help the market seek newer heights, there really isn’t much that will push the market higher at the moment.
Even the upcoming FOMC Announcement has little that it can offer to make the markets feel optimistic, especially as the situation in China is weighing so heavily on our own markets. It’s not so much that there’s really contagion that’s the risk, but rather, in the event of a cash crisis in China or a significant need for capital, there’s always the chance the the government will sell their US Treasury holdings.
That wouldn’t be very good.
But for now, even though this morning’s decline in Shanghai was 2%, that’s a moderation from what happened over the weekend and may show that at least in the short term, China is beginning to control some of those forces that would take their markets even lower.
One question to be asked is just how long the government can continue to stop or slow down the natural direction of the market, but anopther important question is always “How low will it go?” and that applies just as well to energy and commodity prices here in the US, as it does to stocks in those sectors.
Of course, to some degree those are both also related to Chinese prosperity and increasing economic activity.
This morning the futures are moving higher, although moderating a little as the opening bell nears. After 5 consecutive days of losses, it would be nice to have some kind of an end to that string occur, but as we had seen with previous turnarounds to the upside, the best turnaround is one that seems insidious. The ones that are done 200 points at a time to the upside seem to have very little lasting power.
Just as “death by a thousand cuts,” the more sure way to work back from technical support and overwhelm technical resistance is to do so by small pieces, especially as nearing that resistance level.
So for now, I’d be happy to see some small gains and wouldn’t mind if those triple digit moves, usually coming after triple digit losses, just went on a break for a while.