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Uncertainty Gone Yet Stock Market Races Lower....

Stock-Markets / Stock Markets 2010 Jul 17, 2010 - 02:05 AM GMT

By: Jack_Steiman

Stock-Markets

Best Financial Markets Analysis ArticleGoldman Sachs (GS) had a headache over its head with the SEC going after them in a big way. Markets hate uncertainty, thus the stock had been under some strong pressure over the past few months. Late in the session yesterday the news came out that Goldman had settled with the SEC, they got a large fine, and no one would get hurt overall. Great and expected news by this person. The stock raced up some. Goldman always gets away with crime. That's what separates them from the rest. They're simply above us all. Hopefully, some day that will change. For now, they are, basically, untouchable. Anyway, Goldman resolved. Good news for the market.


Item number two. BP Exploration plc (BP) has finally capped the darn oil spill. This has been one of those bad hangovers that never go away. The market having to deal with the photos of the spill day after day. Gushing oil in to our ocean. Makes you sick looking at it every day. Just bad news day after day, but yesterday it was capped. Great news for sure. So, now we have resolution on Goldman and Bp. But wait, there's more. Apple.

Apple the great. Apple the magnificent putting out a product with a severe flaw. It was announced a few days ago that Mr. Jobs was going to make an announcement today on the product. He did. Said you can have a free case. Weeeee! How lucky are we all!!! And if you want, you can bring the product back for a refund. How great is that!! You're my hero My Jobs. A whole case or refund. And I can choose my color? If so, I may not be able to handle it. So, basically he says, we screwed up and we're doing nothing about it, but you'll like it anyway. Of course, this wonderful news blasts the stock up 6$. Such great news deserves such a move higher. Why?" Because he said we can all you know what ourselves. He's not paying for their mistake, and Apple won't get hit financially. Sounds like Goldman. Come to think of it, it is a Goldman situation.

Well, now we have three pieces of good news. Oh, and by the way, Apple gave back all the gains end of day and went red. 247 critical trend line support. Now, we have three great pieces of news. Wait, I'm not done. One other major issue for the market has been whether the Finreg bill will get passed, so we have restrictions against the uncaring. It got passed yesterday. Wow! You'd think the financials would explode on this reality. Not to be.

However, let's update the phenomenal news everyone was so worried about. That once corrected, the market would blast higher. Apple, Goldman, Finreg and the oil spill. So, today we were up huge, right? Well, no! We fell hard. Goes to show you that what really matters is the true state of the economy. Earnings are poorer than expected, and guidance is weak. The good news is behind us now, and the market didn't blink.

So, let's look at today's action. Futures were pretty flat ahead of the big earnings reports coming out of Bank of America Corporation (BAC), Citigroup, Inc. (C), and General Electric Co. (GE). This, along with Goog being down 20$ from the report they gave last night. The market was giving a huge free pass to the bulls, telling them to just get these reports right this morning from the big three. All three did the same thing.

Missed revenues, and had nothing good to say about future guidance. Oops!! Not good. The market futures fell some, and once the market opened for trading, it was all down hill from there. A slow, but gradual, move down throughout the day that closed just off the lows. Nasty action on very poor internals. The good news did nothing for the bulls, but the bad outlook on earnings crushed the market lower. A victory for the bears in a very big way.

The real problem for the bulls, here, is the collapse in the financial stocks since JPMorgan Chase & Co. (JPM), Citigroup, Bank of America, and General Electric reported. Now that the earnings are over, and the outlook is poor, why are people going to be buying stocks in that arena, would be my question. They're not likely to do so in any large way. Always rebounds from oversold, etc., but the likelihood of folks gobbling up these stocks is low at best.

Additional pressure is likely to be the story there for some time to come. If the financials are not participating, this market is not going higher with any force other than the normal rebounds on some news reports and oversold conditions. The gap down in these stocks today without recovery and closing on their lows, and down huge on a percentage basis just isn't good news for the market. No other way to say it. You can't spin doctor price action that came from their earnings reports. Bad news for the bulls short-term for sure.

The internals tell the tale. When the internals confirm price the way they did today, you can't spin doctor it in reverse. 4 to 1 declines over advances on the New York Stock Exchange, and 8 to 1 declines over advances on the Nasdaq. Volume was very decent on the Nasdaq as well at nearly 2.2 billion shares. If the advance-decline line had been near par then today wouldn't be nearly as bad as the price action suggested.

However, this wasn't the case meaning folks wanted out. In addition folks, the 10-year bond dropped back decently below 3% today. This means there's a real thirst to get out of stocks and to get in to safety, even at ridiculously low rates for an entire decade. That is not good to see. Rates below 3% are very bearish for the market.

Although sentiment is on the side of the bulls, it seems the fundamental news is overwhelming things to the down side. Things really aren't very good out there. We are seeing a heavy ramping upward of job foreclosures. We are seeing housing fall off a cliff since the tax break went away on April 30th. Folks cannot only not get a job, most can't even get a decent interview. It is what it is. Again, hope for the best, but prepare for the worst. It seems the worst is making an advancement most of us would rather not see.

Enjoy life and your weekend.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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