Markets worldwide are weak overnight, with Japan, Hong Kong, and Australia all dropping on either side of -1%, while European markets trade down with Spain leading on the downside at -1%. Meanwhile, U.S. futures trade down less than half a percent as investors come to the realization that Fed Chief Ben Bernanke is not likely to reveal anything new in the way of QE at his speech in Jackson Hole, Wyoming, tomorrow. Thus it is logical that some will sell on the basis of no net change in the status quo of QE rhetoric as hopes for some sort of bombshell "hint" in tomorrow Jackson Hole speech dissipate. Meanwhile, U.S. markets appear to be maintaining their own status quo as they move in a short sideways range just under resistance at their 2012 highs. Barring any decisive, strong-volume moves either way, the market is likely to continue to move within its sideways range.
We would tend to use weakness in leading names opportunistically, seeking to pick up shares at logical areas of support or on subtle buy points such as pocket pivots that occur within a stock's base. One thing working in the market's favor has been the continued constructive action among leading stocks, many of which have continued higher such as Amazon.com (AMZN) which moved to an all-time high yesterday.
Not all comes up roses among leading stocks, however. The Fresh Market (TFM) a nascent but thin leader, came out with earnings yesterday and gapped-up at the open, but during the company's conference call lower sales guidance sent the stock careening back to the downside as the gap-up move reversed and the stock closed down 5.72% on the day. TFM confirms the need for investors to stick to stop-loss rules when a trade fails.
Gold and silver, both barometers of QE-on-the-come, have pulled back to their 200-day moving averages as they digest and consolidate the sharp upside moves they have both had in August. We would look for precious metals to hold their 200-day lines on any pullback.