Digesting Wednesday’s Action

Wednesday was an important day in the markets, and it brought us a little more uncertainty about what to expect in the way of near term stock market direction. Here are the highlights I came away with:

1. The July rally on the SPX stalled out, printing a doji at the top of the price channel, leaving the primary downtrend intact for the near term.

2. Pessimistic economic data & news overcame the positive earnings reported so far; we had a choppy day that ended with negative market breadth on the NYSE.

3. Trading in Intel shares was significant: after Tuesday’s close they reported stellar earnings…the stock gapped up at the open and sold off all day on big volume.

4. The bond market reacted to the economic reports by shifting the entire Treasury yield curve down, as the 30 year auction went off well. Not really a bullish signal for stocks.

5. Crude oil tested the 200 day MA and failed.

Taken together, this action doesn’t suggest to me that a bull move in stocks is underway here, so I will be patient and wait a little longer, make the rally prove itself before committing money to new long positions.

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