At A Standoff?

The US equity markets ended down on the day, with the DJIA down 0.5% and the S&P down 0.8% Monday. Industrials and energy stocks underperformed, while consumer stocks outperformed. European markets fell too, as the DJ Euro Stoxx 50 ended down 1.0% on Monday. Asian equities are likely to open down today, as Asian ADRs fell during North American trading Monday. Nikkei futures are pointing to a down open for Japan, and exporter stocks are likely to be hurt by the strong yen.

We cut losses today, and breadth improved in the last few minutes of trading, but there wasn't much energy at all today. It was really an uninteresting day with no real notable buying action to be found. There was a little speculative action in small-cap biotechnology, but all major sectors ended the day in the red. Oil and energy were the biggest laggards, while financials held up relatively well.

The bearish argument at this point is that buyers are pulling back and we are losing momentum. The bullish argument is that selling is mild and all we have going on is some healthy consolidation of gains in a market that needs a rest.

The price action is certainly less vigorous than what we see during earnings season, but we still haven't done any major technical damage. We have sold off on some good news and seen momentum cool, but have not seen a real breakdown or a change in character. That doesn't mean we shouldn't be a bit more cautious, but we haven't seen a change in trend yet. In fact, I wouldn't be at all surprised to see another spike back up in the next day or two to confound the bears who are pressing too hard.