Smack Down in Equity Town

We experienced a triple smack down this morning… and a drop kick after hours.

It’s coming down to the end of the debt ceiling political throw down between the Dems and the Repubs and news this morning that talks had stalled sent some chills through the trading market.  I, for one, think it’s nothing more than politicians flexing their muscles in front of their constituents. In the end, I believe the debt limit will be raised since it always is and we can get that behind us.  When we do move on from this topic, it could help the markets.  Until then, we’re in limbo land and markets hate that. Just ‘get er done’.

Another smack-down to the market this morning was news surrounding the ongoing European financial crisis and the fear of a global credit domino effect.  Italy takes the stage.. who’s next?  This is actually a big issue and will continue to hurt U.S. equity markets until we’re all more comfortable that Europe can contain the mess.  The uglier Europe gets, the stronger the U.S. dollar… The stronger the U.S. dollar, the weaker the equities market – the dollar and the market have had an inverse correlation for a while now.

The third issue hanging over the market this morning came out of China.  Inflation there hit a 3 year high despite numerous efforts from the government to curtail such growth – they need to slow down and that’s not good news for U.S. exporters.

The triple smack down, when added to the horrible economic data on Friday, guaranteed a messy day.  However, that’s the beauty of day trading.  Despite the sell-off, the traders in the Boom Factory today still found winners – that’s the power of working as a team to find timely opportunities.

After hours, AA reported earnings and it was generally in line.. a little miss here, a little beat there.  Overall, however, traders were not impressed and AA finds itself down headed into Tuesday.  In other words, we didn’t hear anything that should help the markets in the morning – we’ll have to look for other catalyst.  They tried to be optimistic, however:

“Although the economic recovery is uneven, the overall outlook for Alcoa — and for aluminum — remains positive,” Chairman and Chief Executive Klaus Kleinfeld said in a statement.

“Demand for aluminum continues to rise and so does growth in our major markets,” he continued. “These factors support our projection that aluminum demand will grow 12% this year and will double by 2020.”

Did anyone notice that NVLS reported after hours today, too, and LOWERED Q3 outlook?  That’s the kind of stuff we have to look for – future guidance.  Too many reports like this and we’ll have a hard time moving the market up.

A look at the market technicals:

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