(By Rich Bieglmeier) These volume-less days are nearly worthless. Stocks swing wildly like monkeys from vine to vine without a purpose or commitment. Up 150 points, no volume, down 150 points, no volume, it's no wonder the average investor is pulling money out of the market. It feels so rigged.
It's not like everybody didn't know that $100 billion or $200 billion or $300 billion isn't going to be enough to solve Spain's pain last week, but stocks managed to rip up enough to give sideline investors that I am missing out feeling. iStock guesses that is why it's called a suckers' rally.
Over the weekend, Spain did its best ODB impression, You better help me solve this problem, Or ima get this money and rob them, and the EU responded by singing the chorus,
Hey, Rajoy, baby I got your money
Don't your worry, I said hey.
Baby I got your money.
The rest of the world rallies on Spain's money haul; it is good news after all. However, the Atlantic is the home of the Bermuda Triangle, where momentum disappears without a trace – never thought of that did you? So, stocks meandered more than 1% down this Monday on no news and no volume.
While the lack of commitment from buyers and sellers makes chart patterns unreliable at best, some truths might be found in recent activity. Friday's close failed to surpass the previous pivot high, usually lower highs are followed by lower lows. The levels to watch for the NASDAQ, Dow, and S&P are 2,747.48, 12,101.46, and 1,278.04 respectively. If these markets reverse course well before the outlined low water marks, and subsequently surpass May's highs, then, and only then, can investors start to think about a new uptrend.
Otherwise, it's highly likely that the indexes will resume tracing the backside of the triangle pattern we identified one week ago.
Even though earning season is still about a month away, the impact of a rising dollar and its potential drag on international companies' earnings are starting to make headlines. On Tuesday, iStock wrote about currency fluctuations and their potential impact on Google's profits.
We would expect to see more stories like Google's as the second quarter comes to a close in the next 18 days. A slowdown in profit growth will have an adverse effect on stocks. Earnings revisions are one of the most reliable leading indicators of where stocks are headed, according to a study this author recently read.
A slew of dollar related misses could lead to negative earnings revisions. If that's the case, the summer's early rough ride could become bumpier. We hope not, but the European financial crisis is likely to push the dollar higher as investors and governments sell euros to buy the greenback.
We will be back tomorrow with our take on Tuesday's action and preview of Wednesday's Retail Sales report.