From Briefing.com: General Commentary - With the indices finally having succumbed to some profit-taking last week, the market enters what could be a critical period for determining its short- to intermediate-term direction. So far, the pullback off the recovery highs has been orderly and has occurred on relatively light volume.
If this pattern were to hold, and the tech-heavy Nasdaq managed to hold above congestion in the 1300 area, then the index/sector would be well positioned to resume its advance into year end. However if 1300 falls, and the index again threatens its 50-day moving average near 1264, then investors will begin to fear that the advance was just another head fake and sentiment may begin to turn more cautious.
Recent bullishness also likely to be tested by this week's economic data, particularly Retail Sales and Michigan Sentiment. Though Fed did its part the other day to jump start the consumer, the fear of job loss and a growing debt burden have investors concerned that the consumer continue to curtail spending. And with business investment virtually nonexistant, if consumers cut back on spending then the economy, earnings and the market are all in trouble. That's why any report that focuses on the consumer side of the economy will be closely scrutinized over the next several weeks.
As we noted last week, most of the good headlines are now behind the market. Q3 earnings weren't as bad as feared; judge ruled in favor of Microsoft's antitrust settlement; Republican's swept election; and Fed cut rates by 50 rather than 25 basis points. Without a buying catalyst and with the indices overextended technically, the immediate bias should be to the downside. Now's when we find out exactly how resilient the bulls really are.
Robert Walberg |
