Yesterday's Fed statement offered a bleak assessment of the prospects of future economic growth in the US and said there are "significant downside risks to the economic outlook." Markets sold off 284 pts after yesterdays Fed statement.
Also, Chinese Flash PMI which is the purchasing manager's index, a measure or manufacturing output, declined to 49.4, the lowest in two months. This is adding to fears that global economic growth is cooling.
US Markets opened 300 pts lower with the SNP down 31 to 1135 and the NASDAQ off 66. Oil cratered tumbling over 6% to 81 and change. Gold fell sharply off almost 4% or 70 dollars down to 1737.70. Meanwhile US 10 year yields hit a new 60 year low at 1.77%
Foreign markets were down with the Hang Seng Index trading down 900 points or 5% and the Nikkei down 180. European stocks as you can imagine are tanking as well with the French, German and British bourses all down 4% or more.
Across South America, the Brazilian Bovespa is down 3.5% and the Argentina Merval is down 4.3%.
It looks like we could be starting the next leg down in the selloff. We still haven't broken down through support so I won't add any shorts until we do. The bulls need to make a stand soon if they want to hold this bottom. Interestingly enough, small cap stocks are outperforming today in a horrible tape which could mean we get a bounce from the lows.
Stocks I'm WatchingIWM- The Russell 2000 small cap index is outperforming today in a brutal tape. It is down 1% less than the Dow. I watch the small caps for signs or risk taking and risk aversion. Usually on a bad tape, the small caps underperform. I'm taking this as a signal that we could bounce back from here and am adding a long.
AAPL- Apple is also performing well today in a bad tape. It seems to be a safe haven in this market environment. AAPL is down only half as much as the DOW. I will probably buy my AAPL back today.
MCD- McDonalds is also performing well today down about half as much as the DOW. MCD is a great place to hide out in this market.
CAT- Caterpillar has been performing horribly lately. It has completely broken down from support around 80 dollars. This is a bad sign for global growth. CAT is down over 10% in the last 2 days!
NFLX- NFLX is up today! This is mildly surprising to me as today is a risk off day and NFLX short is a risk on trade. NFLX is up 1%.
FCX- Freeport McMoran Copper and Gold has been getting absolutely obliterated lately on slowing global growth. The breakdown in this name is a strong signal about slowing global growth. It is down 9% today and 15% in two days.
Market RecapWell it was a pretty bad day for my trading account. I sold my gold long for a 6 percent loss and I tried to trade AAPL today unsucessfully. I bought AAPL in the early going and got stopped out when it dropped past 400 later in the day losing about 2 pct. Today's action was brutal. I don't understand this market right now. I don't see how we can be down 500 pts on basically no news and when Greece was going to hell last week we were rallying! Emergent Markets were down 6-9% today! FCX was down 12%! What the hell! There was no news to justify that kind of action. I know global growth was slowing but so did everybody else I thought. China's PMI wasn't that bad last night! You would have thought Greece went belly up today based on the price action.
With that being said, I am now 100% cash in my trading account. It looks like the market wants to break down from here. EM's have already started the second leg down, it's just a matter of time for the US markets I believe. Call me crazy but on day's like this I like to buy for my long term portfolio so I picked up a small amount of emerging markets stock today. It's probably a mistake trying to bottom feed here but I don't see the justification for the kind of move we had today so I'll pick up some on the cheap.
Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!