Weak earnings from Yahoo! (YHOO) and Bank of America (BAC) are being cited as the reason why U.S. futures are down sharply this morning, but with European markets down sharply we tend to think that the market's issues are broader than that. Yesterday's sharpy rebound rally came on lower volume, and the advance-decline numbers have diverged from prior rebounds in that this time they have failed to move to higher-highs with the market. Precious metals also rebounded, and we continue to believe that the reasons for gold and silver's dive are not likely "good" reasons based on the idea that the dollar is now in healing mode, that QE has done its job, and that the U.S. economy is off and running on its own, as some pundits would have you believe. Caution is warranted here especially given the number of distribution days over the last 20 days. The Put/Call Ratio did spike to its highest level in five months on Monday, which can be a contrarian indicator of high fear levels and thus viewed as a positive for the market, However that is one positive factor among many more negatives, currently.
In economic news, the latest inflation data looked tame, suggesting the Fed has headroom to continue quantitative easing. The question is whether QE is losing its traction, and we would point to the decline in the precious metals and other commodities and indications that perhaps this is not the case.
Splunk (SPLK) had a continuation pocket pivot coming off of its 10-day moving average, but is slightly extended from the 10-day line. In this environment, acting on any buy signals, which have been far and few between in recent days, carry a heightened degree of risk, and investors should certainly take this into account when considering any new or additional purchases of stock.