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The Big Give-Back Begins - Money Matters for 10/26/05 Don Bravo | 10/26/05
Today was an odd one for stocks even by Wall Street's outrageous standard for suffering even the most outrageous lunacies. The usual suspect drivers of stocks - improved earnings, lower oil prices, benign economic reports - were all present and accounted for, yet the markets slipped decidedly throughout the session after an early ramp-up.
Though the losses were nothing of great import, the internals showed more deterioration in the A-D and new high new low metrics, especially on the NYSE, where there were twice as many issues losing ground and gaining and the gap between companies reaching new lows and those stretching for new highs widened considerably for the first time this week.
As mentioned here yesterday, the markets need some sort of catalyst to move in an upward direction and there just doesn't seem to be any on the horizon. We're fully two weeks into earnings season and nothing is going to shake the markets much in either direction. Earnings gains have been muted in general and many of the big name companies have already reported or indicated what the general direction will be.
If anything is going to move stocks, it would likely be the continued gloomy guidance offered by not just a few companies. Prospects for future revenue and profit is a refined art, practiced by analysts and company insiders who customarily rely on sound data to set their marks. Nobody is predicting great guns going forward. Eventually, these guidance numbers are going to add up in some investors' minds and move them to sell shares, though the movement may be slowed by the massive number of institutions unwilling to suffer losses or alternatively, take smallish gains.
Eventually, however, the markets have to move in one direction or another, simply to find some modicum of trading range. In a market so tight, stuck in a relatively narrow trading range for such a long time (heading for two years), something has to budge in order to create new opportunity. Right now, there is no opportunity on either side of the equation, though considering where we have been trading, the best guess would be to the downside.
The sad, apparent truth is that US equity markets are stuck in a serious rut, likely due to overspending by the government, formidable amounts of corruptions by the same, a gulf-wide trade deficit and a consumer that's slowly but surely being tapped out of every dollar he or she earns just to pay for life's essentials - food, energy, and lest we forget, taxes.
Something's got to give.
Dow Jones: -32.89; 10,344.98 close
NYSE Advancers: 1081
Nasdaq Advancers: 1206
NYSE New Highs: 62
Nasdaq New Highs: 78
Gold: -1.70; 473.00 close
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