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Fears rise over PIIGS bailouts and potential war in the Korean Peninsula scare traders away from stocks
markets were rocked with news out of the Korean peninsula where North
Korea and South Korea fired upon each other. Futures weakened
considerably throughout the early morning session as European fears
continued to put pressure on stocks. A better than expected GDP results
and a spike in the Richmond Fed Index couldn’t help push stocks
higher. Volume on the NYSE rose much higher than Monday’s level where
the NASDAQ only saw its volume barely above Monday’s level. Market
leaders were largely positive, but overall the damage was done with the
banks. Today’s action was not ideal, yet we were able to find support
at the lows with a few leaders finishing in the green.
certainly struck the market today as fears regarding Ireland’s bailout,
but now attention is turning to other countries making up PIIGS.
Spain is the real issue here whereby its bailout will certainly be the
grand daddy of them all. It is surprising the European Union hasn’t
set up a TARP like program to deal with its banking issue, but what
really needs to occur is for governments to run surpluses with slashing
entitlement programs. Many will cry foul and ask for bigger taxes,
but increasing taxes does not solve the problem of insolvency. It is
an easy equation and for it to balance out spending needs to be
drastically cut. But, all of this, for our markets with leaders showing
promise we may have seen one giant shakeout.
It is entirely
possible to see the market roll over here and we’ll be very quick to
cut our losses and push to the short side of the market. However, with
the market showing support at the lows today along with plenty of
leaders finishing in the green today it shows a positive direction for
the market. Let’s not use “we are oversold” as an excuse for the
market to go higher. We can certainly stay oversold for quite some
time, but with the recent selling we should see a drastic reduction in
AAII and II Bulls. Stick with the leaders and your stocks.
morning we are going to get a flurry of economic data the market will
get a chance to digest. More importantly will be how the market reacts
to this as well as any news coming out of Europe and the Korean
Peninsula. Any further downside should throw caution to the wind and
should get you on the defensive. Always be prepared and have a plan
and as always cut your losses.
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