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Minyanville's T3 Daily Recap: Europe Jitters, Poor Earnings Weigh on Markets


Earnings within the last 24 hours played part in market weakness today.

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The equities rally was stopped in its tracks Tuesday, as stocks pulled in sharply following two straight days of healthy gains. The S&P finished down around 2.2%, closing around Friday's opening price. Investors seem to be growing more jittery about Europe, where leaders are set to meet tomorrow in an attempt to hammer out a plan for boosting the EFSF. Officials maintain differences of opinion over how, and how much, to boost the firepower of the rescue fund. One thing seems apparent: Greek bondholders are going to be taking a very big haircut.

Earnings within the last 24 hours also played part in market weakness today. Two bellwethers, 3M (MMM) and Cummins (CMI) missed estimates, while Netflix (NFLX) closed down 35%. The streaming media and DVD-by-mail service lost 800,000 subscribers in the third quarter, and disclosed that it does not expect to turn a profit for the next few quarters of next year. The stock, only months ago a momentum darling of the market, was unable to get a significant bounce despite record volume. Any dip buying and short covering in NFLX today was met with selling by disgusted investors dumping their stock.

Technical Take

Yesterday the S&P hit the lower end of our targeted range of 1250-1300, which was a good spot to take profits on some longs. Traders are definitely welcoming a bit of a correction, and anticipate it creating a more attractive area to buy back into this rally.

The million dollar question is: Will things be any different than we have seen over the last three months? Each time the market looked ready to break higher in August and September, more bad news out of Europe sent stock tumbling back to near the bottom end of the range. The market's early reaction to the eventual European aid package will be telling.

Today's low of 1233 is the new reference point, but I wouldn't be surprised to see 1220-1228 get retested, which was the previous resistance of the old range. Also, 1190 is the new line in the sand. A close below this level would be considered a complexion change.

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