The market took the back seat again as the euro kept the bulls from holding Tuesday’s opening bounce. Wall Street was getting battered with news from across the pond which helped the bears dig there claws deeper into the current sell-off.
The falling euro got a lift after the European Union (EU) countries sent some bailout cash to Greece. This gave the market some confidence but by lunchtime the euro resumed its downtrend and hit a new four-year low of $1.216 yesterday.
Meanwhile, the Germans said they were banning “naked” short selling to help keep the financial markets stable while at the same time over here the Securities and Exchange Commission (SEC) was detailing its own new set of rules for our stock market.
We never recommend naked shorts so the first is really no big deal to us. However, the SEC was in a hurry to do something after the market debacle two weeks ago which took the Dow on a 1,000 point ride. They grabbed the bulls by the horn, so to speak, after proposing rules under which they could halt trading on certain stocks if the price were to move 10+% in a five-minute period.
As a result, the Dow traded within a 236-point range and eventually ended the session with a loss of 115 points, or 1.1%. The index settled at 10,510 after touching a low of 10,482. We mentioned in our Weekly Wrap the Dow could test 10,200 if the selling pressure continued.
The S&P 500 dropped 16 points, or 1.4%, to finish at 1,120 while the Nasdaq declined 37 points, or 1.6%, and closed at 2,317.
We haven’t even mentioned the potential impact of the financial overhaul bill that is quickly making its way through the Senate. We won’t comment on that until it happens because we like to keep it short but we could hear something as soon as today, folks.
Of course, we are glad the market is going lower because 90% of the investing public does not know how to short the market or what a put option does. That is why you have us.
“During a correction or bear market, often times you will see spikes at the open then they will fade. We are still expecting a market pullback but aren’t sure if we get 5% or 10% or more.”
This is what we told our subscribers yesterday in our Members Area and as is stands, the market is down around 8% on average from their 2010 highs back in April. Do we have another 2% to go?
We hope so because the gains you can make in a down market rival the ones you can make in bull markets.
In earnings news this morning, Target (TGT, $54.22, down $1.83) reported a profit of $671 million, or $0.90 a share, versus $522 million, or $0.69 a share, in the year ago quarter. Wall Street had expected $0.86 a share. Revenue rose 5% to $15.6 billion, which was also slightly ahead of analysts’ expectations. Shares are basically flat in pre-market trading.
It appears we might have a lower open this morning. As we head to press, Dow futures are off by 34 points to 10,456 while the S&P 500 is down by 5 points to 1,114. The Nasdaq 100 futures are lower by 6 to 1,882. Subscribers, check the Members Area for the updates.