A dour Mario Draghi and an indecisive OPEC are putting some pressure on the market this morning. While Dr. Draghi continues to sound quite dovish, he painted a weak picture of the European economy, which is still struggling with deflation and has not seen any results from its energetic financial engineering.
There were some hopes that OPEC might agree to some caps on oil output, but that did not occur and we are seeing pressure on oil again. Oil has been one of the main supports recently and now it is starting to look a bit toppy, as the United States Oil Fund LP (USO) struggles with the 200-day simple moving average.
The lack of hawkishness from the European Central Bank sets up an interesting dynamic for tomorrow morning's jobs report. This report is widely anticipated to be the key to when the Fed will hike rates. If the report is much better than expected, there will be a high level of confidence of a rate hike no later than July; however, with Europe still struggling, you have to wonder how aggressive the Fed can be.
It was the underestimation of the international economy that made the Fed look so bad with its hike back in December. You have to wonder if they may soften their stance once again after the ECB statement today.
In any event, there is some struggle today and the dip buyers are not nearly as aggressive as they were yesterday. We still have some pockets of momentum, with about 120 stocks hitting new highs and biotechnology is generally acting well, but breadth is about 2 to 1 negative and profit taking is hitting in places.
I've done some minor selling and continue to hold a large cash position.