The market is clearly in consolidation mode. We zigzagged through the unchanged line 5 times during the day and fluctuated within an almost 2 % range throughout the session. Thanks to a late day sprint the Dow managed to close in the gree with a plus of + 71.28 points or + 0.90 %.
Today's trade was driven by the latest bout of earnings releases with Ebay , Apple and PNC bank all exceeding earnings estimates. The market reacted initially positive but lost ground from the opening minutes. We headed down and made the lows of the day within the second hour of the day. From there we oscillated in a wide range throughout the remainder of the session.
The positive effect of earnings releases was dampened by the lates reading of March home sales on an annual basis. The number dropped by 150 thsd to now 4.57 Mio units. The decline countered recent suggestions that the state of the housing maket was improving.
The non directional activity we are currently witnessing typically indicates that a bigger move is about to happen. The market is awaiting earnings releases by Microsoft, Amazon and American Express after the close and perhaps this will provide some impetus for tomorrows trade.
My best guess is still that we will head lower and test the 7500 level in the Dow. I fail to see the catalysts to drive prices convincingly higher. There have been enough individual stocks which could have provided participants with the motivation to lead prices higher.
The fact that this did not happen suggests to me that out next move is down.
As such I remain market neutral and wait till the market hits 7500. A convincing upside breakout above the 8050 level with a close above would lead me to believe that another move up might be in the cards though.
Regardless of the above...the down move I expect has to happen rather soon (by Tuesday next week). If not the likelihood of another up move increases quite a bit.
Until tomorrow,
Steve Benger
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