Outlook for Friday, August 1, 2014
Stock markets around the world got shellacked yesterday as a
plethora of negative news sent investors running for the exits.
No one overwhelming factor sent the markets down; it was more a
case of death by a million paper cuts.
The market had to digest some poor earnings reports, the
biggest drop in Chicago PMI since 2008, a major Portuguese bank
defaulting on debt, more fighting in
and the prolonged situation with
. In combination it was enough to trigger the plunge.
Portuguese And Argentine ETFs Under Pressure
This morning the market is on the defensive once again. Dow
futures were down nearly 100 points with two hours until the
At 8:30 a.m. the background worries were overshadowed by the
monthly jobs report. The government announced 209,000 jobs were
added in July, well below the consensus expectation of 255,000
jobs that itself would have been a slight decrease from last
SPDR S&P 500 ETF (NYSE:
Today the action to watch is the overall U.S. stock market,
which is in the midst of an overdue pullback from an all-time
high. Many investors are not taking the selling well making SPY
the ETF to watch.
The two percent sell-off in the shares of SPY yesterday were
not only significant for the magnitude of the move, but also
because the ETF closed below the 50-day moving average. The ETF
closed at $193.09, well below the $195.37 where the indicator is
This is not the first breakdown; it has occurred four other
times in the last year. The average amount of time it has traded
below the 50-day moving average is nine days, and each time it
was followed by a rally to a new all-time high.
The next level to watch is the 200-day moving average, which
the ETF has traded above for nearly the entire bull market. The
indicator is currently at $185.78, and it continues to increase
on a daily basis.
If the ETF were to drop all the way to this level today it
would seem dramatic, but it would be a pullback of less than 7
percent from the all-time high. In the big picture such a
pullback is healthy and in no means the beginning of the end for
the bull market.
© 2014 Benzinga.com. Benzinga does not provide investment
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