Is the Market Delaying the Inevitable?

 | Apr 18, 2017 | 4:26 PM EDT
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Late-day buyers saved the market after a poor start, but you have to wonder if they are simply delaying the inevitable. There was headline news about Brexit, other macro concerns and a number of poor earnings reports but, as is so often the case in recent months, the negatives were shrugged off and the indices closed well off the early lows.

Even though the indices did recover from the poor action at late morning, it was not a very impressive recovery. Breadth finished with about 3,000 gainers to 3,700 decliners and the DJIA was the laggard with a loss of 0.56%, primarily due to the negative response to earnings from Goldman Sachs (GS) .

In addition to Goldman, Netflix (NFLX) and Johnson & Johnson (JNJ) saw negative responses to their earnings. Even Bank of America (BAC) , which had a good report, struggled and closed in the red. This reaction to earnings does not bode well. IBM (IBM) just reported and is trading down initially.

The bulls will take some comfort in the fact that the indices keep finding support and have not fallen into a full-blown downtrend. The S&P 500 hasn't made a new high since March 1, but the bears can't seem to close the deal and kill the uptrend.

The key level in the market remains the March lows and they have not come into play, although the DJIA is coming close to testing that level. The other indices are doing better but about 40% of all stocks are below their 200-day simple moving average of price, so there has been quite a bit of corrective action under the surface.

While it is possible the market has found a low and will rally from here, it is not a good setup. The bulls are holding but they don't seem to have enough energy to produce sustained momentum. We haven't seen the sort of action that we had in December and February when optimism about the Trump presidency was quite high.

The bulls are doing what they need to in order to prevent a downtrend from developing, but it feels like they are simply delaying a deeper correction, which would be a healthy correction. The bulls are happy that things are holding, but that doesn't make for many good opportunities.

I remain cautious and expect a further downside test will occur soon.

Have a good evening. I'll see you tomorrow.

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