The Dip-Buyers Save the Day

 | Jan 21, 2014 | 4:20 PM EST
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It looked bleak for the indices after the gap-and-fail open this morning, but breadth never went negative and the dip-buyers came to life at midday. The market bounced strongly and closed well, although the DJIA lagged again. The most impressive thing about the market was its breadth, which approached 2:1 positive.

The inability of the indices to gain traction has caused the bears to be hopeful, but the market refuses to roll over. There is plenty of good action under the surface and the main concern of many traders is finding the movers. There is no real fear, but that lack of negativity isn't the contrary indicator the bears are hoping for.

IBM (IBM) earnings are out and the stock is up a few cents initially after an earnings beat and revenue miss. We have yet to see any great earnings reports, and that may be a problem if there aren't a few better upside surprises. The buyers still want in, but it helps if they have good reasons to continue to like the market.

Overall, the market is holding up well, though the lack of momentum is an issue. The time to worry will be when stock-picking loses its appeal.

Have a good evening I'll see you tomorrow.

Jan. 21, 2014 | 1:55 PM EST

Just Treading Water

  • I should have bought the dips but I'm not feeling aggressive today.

The indices have bounced back from what looked like a sell program this morning. There are pockets of weakness but the market continues to hold up well overall, and breadth is still quite strong. The problem is that the indices are still around flat for the year and the bears are convinced that this lack of momentum is an indication that a correction is coming soon.

The bears may be right, and it would actually be a healthy development if the market underwent a decent correction, but there still aren't any major negatives. In fact, the underlying action continues to be better than what we see in the indices and, other than a sell program or two, there hasn't been any sign of panic. There is ugly action in places, but it is contained and not spreading so far.

I've been treading water this morning. I probably should have bought some of the dips but I'm not feeling aggressive. We have seen a number of weak closes lately and that is what I'm going to focus on today. If this bounces continues into the final hour, I'll be optimistic that the bulls can keep running, but a weak finish will be a sign that nervousness is increasing and that it is going to be harder to keep the momentum going.

Don't forget that earnings are rolling in. We have IBM (IBM), Texas Instruments (TXN) and Cree (CREE) after the close and several dozen more in the days ahead to keep things interesting.

Jan. 21, 2014 | 11:48 AM EST

Sticking to Solar

  • I have an eye on several names in this hot sector.

Even with a gap-up open to start the week, there wasn't much early momentum and the indices have turned downward.

The lack of sustained momentum in the indices is one thing that has shifted so far this year; fortunately, there are still plenty of individual stocks running, led again by biotechnology.

Tesla (TSLA) continues to gain momentum, JetBlue (JBLU), a Sharkfolio position, is breaking to new highs and Relypsa (RLYP), a thin biotechnology name I've mentioned several times, continues to run.

This weekend I highlighted the solar sector, which is quiet so far, but I have my eye on SunPower (SPWR), JinkoSolar (JKS) and Real Goods Solar (RSOL) for additions. Plug Power (PLUG) is another alternative energy name on my radar.

The S&P 500 is making an intraday low as I write, which is not a good sign; however, individual stocks continue to hold up well. It is a lot tougher for trades to work when they don't have the indices as a tailwind.

It is probably good to keep positions a bit smaller than normal until we see better upside momentum in the indices.

Jan. 21, 2014 | 8:10 AM EST

A Stock-Picker's Market Once More

  • Earnings season, moreover, should only heighten this theme.

The secret of getting ahead is getting started. --Mark Twain

So far in 2014 the major indices have done very little: The S&P 500 is almost unchanged and the Dow has lost about a 100 points. However, the action will pick up this week as we head into the meat of earnings season and talk increases regarding what the central bankers will do next.

On Monday central bankers in China dumped a big pile of cash into the economy, and that is boosting markets around the world. In addition, The Wall Street Journal has an article out by Jon Hisenrath, Federal Reserve mouthpiece, stating that the central bank isn't worried about soft employment numbers and is likely to announce further stimulus tapering next week.

Although the bears were quite convinced that tapering would be a major negative, the first round turned out to be a very positive catalyst. Folks are happy to see some improvement in the economy, and they seem willing to accept higher rates for better growth.

Some folks have expressed concern that earnings may disappoint, and some issues are definitely out there, given some of the news from the likes of Intel (INTC), Best Buy (BBY) and UPS (UPS). We will see this week if expectations are low enough to prevent some "sell the news" action. The bears are growling about poor numbers, but for several years it has been a mistake to underestimate earnings, and I would not be overly pessimistic at this stage. There are always some winners, and expectations are usually low enough to prevent major negative surprises.

So far this year, the mood of the market has been very different from what it was in 2013. The indices are holding up, but they have suffered a few bouts of selling, and that is keeping the mood much more sedate. Last Monday many market players were convinced that the market was heading for some trouble, but it bounced big on Tuesday and Wednesday before fizzling out. On Friday afternoon things looked poor again, but the open this morning looks to recoup all those late losses.

This market has been trading in a quite choppy and even arbitrary manner at times, but the more interesting aspect has been that stocks aren't moving in a highly correlated manner. That is good news for traders, as it means selective stock picking and good money management is producing positive results. Dozens of stocks are showing extremely strong momentum, and the number of stocks hitting new highs remains quite elevated. The indices are not reflecting the good trading under the surface.

The action on Friday looked a little soft, but the mood is upbeat to start the week, and we'll see if the bulls can regain some momentum. It is a stock-pickers' market, rather than one of market timers, and earnings season will only enhance that theme and help keep the focus on good individual names. There will be some positive surprises, and that will keep traders active.

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