U.S. stocks experienced sharp losses on Wednesday on the back of weak December retail sales data, which suggests that corporate earnings will continue to be downgraded. The major averages all broke through their December lows, and appear to be on their way back down to the November lows. Since it has been a couple of months since those lows were made, the market could be setting up for a more reasonable attempt at a successful re-test. However, that is if the re-test occurs relatively soon. If it takes time to get down to those lows, there would likely be a dead cat bounce, and then a new leg down would surely unfold. At this point, all we can do is wait and see.
Another result of today's release of weak economic data was a rally in the Treasury markets. Five year notes actually made new highs today, while the 10 year notes and 30 year bonds also rallied nicely.
Surprisingly, the Dollar held its own today in spite of the weak data. Commodities also managed to hold their own as well.
Next week may be the day of reckoning for this market as Obama takes office. No matter what though, it will take an awful lot to get this economy headed in the other direction. A lot of money has been lost by both individuals and corporations, and it will take a long time to restructure. In the meantime, it will be the government that needs to step in and provide new jobs, as the corporations and small businesses scale back.
Scott Cole
www.bestdaytradingstocks.com
www.kungfutrader.com
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