The trading day Monday started poorly, rallied impressively only to fall back on the release of the Reid (endorsed now by Obama) plan to raise the debt ceiling while cutting an imaginary $2.7 trillion from spending. It's the details that insult your intelligence. They include $1 trillion in "savings" from winding down wars (really?), $400 billion in interest savings (how?) and $1.2 trillion in unknown discretionary spending cuts. It also creates another bipartisan panel to find future savings. Didn't we just do that part?
Anyway, when investors looked under the hood they started selling stocks. The intent is to front-run the soon to be announced
which will be a two-step process. We'll see how far that goes.
Meanwhile stocks, bonds, commodities and the dollar all ended the day lower as investor credit and debt worries intensify. But it's a Monday in July and we've had these types of Mondays before.
Volatility and two-way action will remain high throughout the week as earnings, economic data and the debt ceiling issue battle one another.
Stocks making news were Apple (AAPL) which briefly tagged $400 once again even though it appears Samsung new phone is outselling the iPhone for now. Also Google (GOOG) had a decent day as well.
U.S. stocks opened sharply lower then rallied most of the day until the Reid plan was introduced and the selling began with volume increasing on an ultra-light volume day. Breadth per the WSJ was quite negative.
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is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.
McClellan Summation Index
is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.
is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.
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Dueling press conferences over dueling plans is the feature of markets currently. Theoretically there will be some sort of compromise between the two plans and then we can move on. Both plans may still result in a credit rating downgrade since they don't fix the debt problem period.
A comparison of the plans is
. The problem with the Reid plan is with phantom cuts which seem apparent. I'm not sure I like the Boehner plan either.
Tuesday we get the Case-Shiller Home Price Index, New Home Sales, and Consumer Confidence plus a boatload of earnings reports.
Let's see what happens.
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