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Stocks trade under pressure as traders focus on tapering

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Stocks trade under pressure as traders focus on tapering

Stocks in the US were under pressure starting the trading session on a down note and following through as the Dow Jones Industrial experienced a triple digit loss.  Economic data in the US next week will focus on retail sales and consumer inflation, while earnings rap up a very busy season.

Stock market investors are now preparing for a potential tapering of the Fed bond purchase program after the FOMC meets in September.  Although economic data continues to be mixed, the bond market has already priced in a tapering of approximately 20 billion dollars per month.  The Fed could experiment with an initial small level of bond tapering and add it back if economic conditions worsen.

In earnings news, Priceline beat estimates on the top and bottom line, and has rebounded back to its dot.com era high. Robust second quarter earnings have pushed the stock back toward $1,000. The catalyst for the most recent leg was a jump in summer travel bookings, which helped the online airline and hotel reservation service post a 24% increase in profit to $437 million on Thursday. Revenue jumped 27% to $1.68 billion.

The Nasdaq 100 was the best performing of the major indices moving into positive territory mid-day before slipping later in the trading session.

The Nasdaq 100 edged lower, but momentum has changed and the MACD has created a sell signal.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.  The index moved from positive territory to negative territory confirming the sell signal.  The RSI edged below the overbought level of 70 settling near 62 which is in the upper end of the neutral range.

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