S&P futures opened 15 handles lower this morning, following world markets to the downside after the Bank of Japan disappointed investors by standing pat despite recent volatility in the Nikkei. Many expected the central bank to take steps to calm markets, evidenced by a 5% bounce in the Japanese index the day before the BoJ announcement. The S&P tried to bounce early in the session but gave back those gains to finish down 1.02%.
It still feels like the May 22nd outside reversal is in control of this market. Since that loud reversal signal, the market has hasn't been able to build on multi-day bounces. Right now the S&P is in a bit of no-man's land. Will we shake off world market softness and climb back above the 8- and 21-day MA, or retest the 50-day? If you knew the answers to those questions, you would likely be a billionaire; us morals will have to gauge the price action at key levels to manage the risk-reward ratio on each trade.
Solar gave back most or all of yesterday's gains after very weak earnings from sector minnow LDK Solar (NYSE:LDK). LDK isn't a sector leader, but its disappointing results are a reminder that the industry still has a long way to go.
Big cap tech was weak, but if the market finds its footing, you could potentially look to buy the dip on stocks like Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG). Apple (NASDAQ:AAPL) was quiet today after selling off during yesterday's WorldWide Developers Conference, and remains out of play.
The banks were weak today, largely thanks to reports relating to possible currency-related losses for Citi (NYSE:C). Charles Peabody of Portales Partners, LLC, came out and said he believes Citi could face up to a $7B loss if the dollar continues to surge against the Yen and Euro. C finished the day down 3.81%, while a peer like Goldman Sachs (NYSE:GS) finished down 2.5%.
Bonds (NYSE:TLT) were able to bounce today, helping support my thesis that the "QE tapering" narrative has become a bit overdone. The TLT does have a sloppy head and shoulders pattern that could foreshadow lower prices, but I don't think that pattern is ready to trigger and bring the early stages of the much-ballyhooed "great rotation." The Fed may look to reduce the volume of QE purchases in the next few months, but I think fears about them suddenly become significantly more hawkish are overblown. TLT finished up 1.18%.
*DISCLOSURES: No relevant positions