Bad News From Financials And Weak Consumer Spending Put Stocks Back In Their Place

Ongoing bad news from financials, oil and commodity price rebounds while consumer spending weakens put stocks back in their place. Bulls would suggest this is just part of a bottom building process while bears would suggest we’re just at a resting point before beginning another leg lower. Me? My chief concern is a trading range environment where meaningful and durable trends don’t exist.

Volume wasn’t very heavy [let's remember its August] while breadth was unremarkable.

That about covers the world methinks. So I made up for yesterday’s absence. But, it was a beautiful day here in the Andes and a little stroll to the colonial center was a pleasant break. Besides I wanted to wait for today’s energy inventory data since prices and trends are much on investors’ minds.

The beat goes on for financials. This shouldn’t surprise. Losses according to a wide variety of sources are now put at over $500 billion from mortgage related securities. Further many suggest losses will rise to $1 trillion with economist Noriel Roubini predicting $2 trillion. Those are mind numbing numbers aren’t they?

There are continuing rumors of another major financial firm about to collapse. I have no idea whether this is true.

From a trading and investing perspective, I fear a trading range environment more than any other circumstance. Should that occur the only defense is heavy cash balances. For most portfolio managers maintaining large cash balances is an anathema. Not for us.

Thursday more inflation data and don’t forget options expiry on Friday. Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in: IWM, QQQQ, QLD, IGV, IGN, IBB, XLP, XLV, RXL, UUP, GLD, DZZ, DBC, DEE, USO and XLE.

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