Courtesy of John Nyaradi
In today’s market action, global markets tottered on the edge in response to fast moving developments around the world.
The action actually started in the after hours session on Monday evening when Alcoa missed expectations and was hammered by intolerant investors.
Today’s trading brought the S&P 500 to close just below its 50 Day Moving Average and the index remains on a Point and Figure “sell” signal. The VIX spiked by 3%, the long U.S. Treasury jumped 1.1% and the Dow gave up 0.95% with the S&P 500 dipping -0.78%. This puts us back at significant support in this sideways market and we’ll find out soon whether or not these levels will hold.
On Monday, we closed our USO call option for a 20% gain in a month. This proved to be fortuitous timing as oil dropped some 3.5% today on an International Energy Agency forecast that high prices were triggering a global demand slowdown and could lead to slower economic growth. This should not come as a surprise to anyone and all portfolios remain positioned for more potential downside price action ahead.
Overseas, problems continued in Asia as the Japanese nuclear accident was upgraded to Crisis Level 7 on the International Nuclear Event Scale. This is the highest level and equal to the 1986 Chernobyl accident in Russia and two levels above the Three Mile Island Accident in 1979. Crisis Level 7 means it’s a major release of radioactive material with widespread environmental effects.
As I wrote you recently in “ETFs for a Troubled Japan,” this incident will likely have very long term and significant consequences for the Japanese and global economy.
I also read various reports that the much ballyhooed budget cuts weren’t really cuts at all as they came out of money not yet spent or planned in future years. If this is the case, then truly it’s the most absurd example yet of kicking the can down the road that seems to be the unique specialty of our political and financial leaders. President Obama unveils his new budget plans tomorrow in a speech in Washington, D.C. and early rumors point to reductions in entitlements along with higher taxes and so I can just imagine the fulminating that will come our way in response to those proposals.
Tomorrow comes March’s Retail Sales Report which could have market moving implications.
Have a great evening and we’ll talk soon.
Best,
John
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