Daily Analysis

Stock Index Futures

U.S. equity markets fell sharply lower. Investors are beginning to question stock price valuations. The recent rally was triggered by foreign demand for risk and better than expected corporate earnings. Now that demand for risk is diminishing because of the strengthening U.S. economy and earnings results are being questioned, it appears buyers have become scare and longs are exiting existing positions.

Investors are beginning to demand more than better earnings caused by cost cutting measures. They want to see greater spending by consumers driving up revenues. Money is still on the sidelines, but investors may not want to commit these funds until stock valuations get more in line with future earnings expectations.

Tomorrow’s Fed FOMC may have a lot to do with today’s light volume and sharp sell-off. Without big buyers present to buy the dips, bearish traders had the upper hand and helped drive out the weaker longs.