Thursday Thud – First Quarter Ends With Dow Down 1,000 Points

Down 1,000 points isn’t so bad.  

Well, it’s bad if we consider that we were up 2,000 in January (26,600) so down 3,000 since then is 11.3% but let’s say we claw back to 24,000 this morning – that would be down almost exactly 10% and you don’t want the -10% line to act as resistance on the way back up – that gets very ugly, technically.  

Of course, nothing it technically uglier than failing the 200-day moving average and, so far, we have narrowly avoided that by bouncing off 23,500 but, if we call that a 2,000-point drop from the 50 dma, which was 25,500 when we were up there (since dragged lower), then we expect to see 400-point bounces to 23,900 (weak) and 24,300 (strong) – and we’re a long, long way from 24,300 so it’s a weak finish to Q1, at best. 

Today is the last day of the quarter because tomorrow is a holiday and Monday is spring break (I’ll be in Florida) so the volume is very low and nothing the markets do today or even next week are going to matter much. If we can’t claw back over 24,300 by the end of next week – it’s not going to happen.

Next week is still sleepy for earnings as well and April 13th is the official kick-off for earnings season, with CitiGroup (C), First Horizon (FHN), First Republic (FRC), JP Morgan (JPM), PNC (PNC) and Wells Fargo (boo!) all reporting that Friday the 13th morning – good luck to all of us!  We did very well shorting XLF into January earnings but, like the market, we’re down 10% from there so it’s a bit trickier to call now – I think we’ll just wait and see if that $27 line holds but, if not, another 10% down should do the trick.

So, to decide whether or not we should be bullish, we look at our big banks and decide whether or not they are likely to rise or fall on earnings and that then will give us our premise for what is likely to happen as earnings season kicks off.  We will call that The Big Bank Theory!