Stock Market Breaks Down: ETF Bulletin

Today the U.S. stock market and major equity indexes suffered a major breakdown as investors responded to unexpectedly poor economic reports.
However, at Wall Street Sector Selector, we had a nice day as our inverse ETF, put options and cash positions served us well.

We remain in the defensive mode, expecting lower prices ahead.

Fundamental news remains troubling, at best, as June consumer spending declined -0.2%, the first decline since 2009, and personal incomes were basically flat at +0.1%.

Italy and Spain moved back to the “front burner” in Europe with an emergency session in Italy to discuss their financial situation and the cancellation or delay of vacations for high level officials in Spain and Italy who have to deal with this ever recurring crisis.

In spite of the high level show of force and solidarity, Spanish and Italian 10 Year bond yields spiked to record highs as the markets registered their disbelief in the countries being able to grow their way out of debt as the global economy slows.

At home, the deficit ceiling debate finally ground to a close on the very last day before Armageddon and Moody’s gave the deal a mixed review by reaffirming the USA’s “AAA” rating but with “negative outlook.”

On a technical basis, severe damage has been done.

Today was a tough day for the S&P 500, as the 200 Day Moving Average was decisively broken. The only possible saving grace is that we’re still above the March lows, but that level was well above the 200 DMA at that time and so it could be argued that this selloff is significantly worse, not to mention the fact that we are now in the longest decline since late 2008 during the darkest days of the credit crisis or that the S&P 500 and Russell 2000 are now negative year to date.

Global Market Summary:

Dow Jones Industrials (DIA): -266; -2.2%

S&P 500 (SPY): -33; -2.6%

NASDAQ (QQQ) -75; -2.8%

Russell 2000 (IWM): -26; -3.3%

Tomorrow’s Action:

Economic Reports:

Tomorrow brings our first peek at the employment situation with the July ADP Report and we’ll also get another shot at major economic reports with the ISM Non Manufacturing and June Factory Orders.

I’m starting to repeat myself, but it just doesn’t get more exciting than this.

I’m in London, England, tonight where it’s a beautiful summer evening and Hyde Park was full of young city dwellers enjoying the August sun. I was happy that most were blissfully unaware of the storm clouds that are gathering around us.

Have a great evening,

John

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Disclaimer: Wall Street Sector Selector actively trades a wide range of exchange traded funds (ETFs) and positions can change at any time.

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