Failing Support

S&P500 daily at end of day

End of Day Update:

Stocks stumbled on a combination of disappointing economic news and weak blue chip earnings. We crashed through technical support at the open, recovering some of those losses by the close, but not enough to push the market back above support.

It is a strange world we live in when markets rally on seemingly devastating news for Euro stability, but then a hodgepodge of obscure economic indicators and company earnings take the market’s legs out. Volatility has become par for the course and nothing should surprise us anymore.

The thing that troubles me is we have seen very little volatility in the market’s steady ascent from the 2011 lows. For a long stretch, we could count all the 1% moves on our fingers. But more recently, a 1% move is benign and more often we are surging and crashing from day-to-day. It really feels like the market’s personality is changing. If that’s the case, it means we are going from steady up trend to something else. Maybe that’s choppy sideways trade. Maybe it’s the long-awaited correction. Or maybe we explode higher in one last surge before collapsing. Only a few percent from all-time highs, it is hard to conclude which of these outcomes is happening, all we can say for sure is this feels different.

Index futures are up after Apple’s blowout earnings, but the market decoupled from Apple a few years ago and the two often trade independently. A big move for Apple doesn’t automatically raise all boats in the S&P500. Outside of a brief pop at the open, the Apple story will become a single stock event and the rest of the market will quickly return to whatever else has been driving it recently.

Technically, if the market cannot reclaim 2,050 by Wednesday’s close, that shows we are running out of buyers and should prepare for a test of the 200dma. This the time for bulls to show they are still in control. If they cannot, lookout below.

Jani