Tame Trading an easier way to trade

Here’s the Deal:

Greetings from a snowy Atlanta. I am running late because I had to run out and get some milk and bread for the storm.

I am not sure which was a greater surprise; the market’s quick AM recovery after the dreadful overnight action of the futures, or the (not so surprising) late day rally failure. “They” tried very hard to stop the market from breaking down Wednesday morning, but it was too late. The news driven pop higher was, as expected, short lived. Despite the early efforts, the opening lows were taken out and most importantly, Quarterly Sell Signals were given. Incase you missed it, I detailed the historical aftermath of quarterly Sell signals over the weekend (Daily Outlook 01/13/08.)

From a pattern stand point, we have a near-term overlapping mess. 12,600 is a clear resistance level, but 12,700 is clearly a major overhead Fibonacci resistance area.
At the end of the day we have a market that is significantly extended to the downside. The Dow is up against the bottom of the 21-day trading band. However, despite the extremes, money runners are finding few if any reasons to put cash to work. Unless or until folks come up with a reason to really buy, at best we are looking at a trading rally.

Here’s the Deal:

All the counter-trend could manage was one day of lower quality rally type action. Citibank reported a write-down of $18.1 Billion. The ball bark expectation was $20 billion, but I recon this is a case where it is one thing to talk about pending bad news while it is another to “live through” said bad news. That said, the PPI and Retail sales, while in the not good category, were better than expected.
At the end of the day, the “reason” for Tuesday’s sell off is pretty simple. The US consumer is in a bind and being forced to pull back, and the data flow is beginning to confirm the economic realities.

Intel reported after the close and is trading down hard. Their headline numbers were ok and in line. It seems it is the guidance that folks are focused on, and that is why the stock is trading almost 3 points lower in after hours trading. I doubt this will be the first company that gets whacked because of “conservative” forward looking guidance.