Major averages gapped lower on Monday then carved new intra-day lows only to rebound and finish with unimpressive mid-range closes. While volume was well below Friday's quadruple witching volume, it was slightly higher than Thursday's high volume on the NASDAQ Composite. All major averages now are below their respective 50-day moving averages.
One of the Federal Reserve Bank presidents, Narayana Kocherlakota, said that the central bank hasn't become more hawkish and called for more clarity in how the central bank communicates with the public. Over in China, Ling Tao, a deputy director of the People’s Bank of China, said that its central bank will look to dampen volatile money-market rates, guiding them to a “reasonable range” as the current volatility is temporary. Both statements could help to put a floor on the current sell off so that markets can resume their QE-induced uptrend. That said, the Market Direction Model remains nimble and flexible as the market is at an inflection point in either direction. Intensified selling could lead to further selling as big funds continue to exit the markets and margin calls are met.
Durable goods orders were up 3.6% in May, slightly under expectations of 3.8%. Much of the increase was due to aircraft orders, which if stripped out of the volatile transportation sector, would reduce durable goods orders for the month to a much smaller 0.7%. Durable-goods orders have risen 2.1% in the first five months of 2013 compared to the same span in 2012, a mild increase that reflects slow going in the U.S. manufacturing sector. This slow growth can be viewed as positive for the markets as Bernanke will keep QE flowing should the US economy continue to grow at an anemic pace.
On deck at 10 a.m. EDT is data from the Commerce Department which is expected to show new home sales climbed about 2% to an annual rate of 463,000 in May, from 454,000 in April. At the same time, the Conference Board’s consumer confidence report for June is due, and economists expect a drop to a 74 reading from 76.2 in May.
While the market is in a downtrend, being long stocks has been treacherous, so if there are any lone surviving stocks on the long side, keep stops tight as always. And while shorting has been profitable, oversold names could bounce especially should the market find its footing.