9:00am (EST)
This is one of our favorite titles to use in our daily updates from time-to-time and it was 25 years ago when Sweden’s rock band Europe rocked the globe with their hit song “The Final Countdown” which hit #1 in 25 countries and #8 here at home. In fact, the song rocked to the top in France, Germany, Ireland, Italy and the U.K. and hopefully it was introduced before last night’s European summit to remind the leaders what kind of crisis they are facing.
Of course, Wall Street has played this theme song all week as nothing else has mattered as the market awaits word on what the real “plan” is to fix Europe’s debt crisis.
The grapevine has been juicy with rumors all week on if Europe will pull out a bazooka or a water pistol and yesterday’s action signaled the latter.
The “pullback” was a little more than we expected, but not by much. Although our first wave of support broke down into the close, it is important to realize that things get stretched. It is also why we list backup targets in case a trend is about to change but we aren’t there, yet. Thursday’s action was scary but we’re not ready to throw the baby out with the bathwater.
The Dow dropped nearly 200 points, or 1.6%, to close at 11,997. The blue-chips were in the red from the start and traded to a low of 11,966. The 12,000 level fell late in the day after being tested for much of the session and 11,800 will serve as backup. If this level falls then look for 11,600 to hold. If not, things will get ugly in a hurry. Upside resistance is at 12,200 and then 12,350-12,400.
The S&P got punished for 27 points, or 2.1%, to end at 1,234. The 1,250 level was breeched about an hour into the open but 1,225 held all day as the low came in at 1,231. If this area is busted, look for 1,200 to hold and then 1,175. After that, the fat lady will be warming up her vocal cords. The bulls will try to go into the weekend at current levels but good news could motivate them to push 1,250-1,275.
The Nasdaq fizzled 53 points, or 2%, to settle at 2,596. Tech went out on its lows and failed to hold 2,600 which could bring 2,550 into play. The bears could also push 2,500 on continued weakness and a break below this level would get us nervous. Of course, the bulls will try to reclaim 2,600 and then some as they work their way back to 2,650-2,700 on hopes of a resolution from across the pond.
Last night, 23 of the 27 EU leaders reached an agreement with Britain, Hungary, Sweden, and the Czech Republic wanting no part of a “treaty”. The good news is that some type of agreement was reached but we aren’t sure if the market will buy this as a credible backstop for the debt crisis. Wall Street may need a little more convincing.
Moody’s got into the mix after midnight (imagine that) and downgraded 3 French banks but futures are holding up as we head to press. Dow futures are up 30 points to 11,974 while the S&P futures are higher by 5 points to 1,235. Nasdaq 100 futures are advancing 5 points to 2,286.
