Friends,
November got off to a rocky start today as a combination of European news and additional problems with the MF Global unwinding sent stocks lower right from the start. The Dow Jones Industrial Average was down 297 points for the day and the S&P 500 was down 35 points to close at 1218. Stocks were vulnerable when it was learned that Greek Prime Minister Papandreou called for a referendum on the Greece bailout plan, which caught the Germans and the French off guard. This may also lead to a confidence vote on Papandreou’s ability to continue, as his leadership is even more in question than it was. All this sent German and French stocks down more than 5 % and set the tone for trading as the U.S. market opened. In just two trading days, the U. S. averages are giving back a good portion of October’s trading gains. Just when we thought we might have a week or two of quiet from “over there”, we find ourselves right back in the soup. We’ll see how Merkel and Sarkozy handle the situation in the next couple of days, but if today is any indication, we may be having to deal with Greek issues for several weeks to come.
On the domestic front, the bankruptcy filing of MF Global is not helping the situation any, as once again contagion is a concern, not to mention, where are the regulators once again? You just want to cringe when you hear these things, and memories of 2008 dance in our heads. Hey, at least they aren’t too big to fail. They did indeed fail. All this overshadows nice earnings reports from the likes of Emerson Electric and Pfizer. You know I yearn for the days when how a company actually performs, dictates its stock price, and not the ramblings of Greek politicians. I guess its learning to live in a global macro world. The bond market’s reaction to all of this the past few sessions, by the way, is the 10 year treasury rate falling from over 2.30% to around 1.95%.
The Fed is in a two day meeting and will announce its interest rate decision tomorrow (no suspense there of course), then Dr. Bernanke will have his press conference. We’ll get an idea if there is any more QE in our future and exactly what form it may take. Once again, the employment numbers come out Friday and we will be keeping an eye on that.
As we look for technical levels to watch, the 1257 to 1260 on the S&P support did not hold, therefore we were looking at 1230, the 100 day moving average, to be the next serious support area. Unfortunately, as we have seen in recent months, these technical levels are taken out in hours and 1230 did not hold today either. 1220 was a resistance level we crossed on the way up and we hoped to see it hold on the way back down as support. The close near that level will make tomorrow’s action important, but the European news is determining every short term move right now, and the technical levels become more difficult to define in this type of volatility.
Hopefully, we can get November back on track and regain the nice ground we made in October. Have a nice evening everyone. We’ll get back at them tomorrow.
