What Hasn't Changed in the Market

 | Jul 08, 2014 | 1:25 PM EDT  | Comments
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Stock quotes in this article:

yelp

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crm

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pcln

Why am I so insistent that the thin trading is behind the gigantic declines in the momentum stocks, as well as the sizable selloffs in the industrials? Because nothing has really changed since last Thursday's employment number except more saber-rattling in Ukraine and some mobilization in Israel.

Plus, the only things we have seen in the macro environment are noticeable declines in wheat, corn, soy and natural gas, and a slight selloff in gasoline. How in the heck that can be negative when there is so much Sturm und Drang about inflation is beyond me.

One thing hasn't changed. When we have a severe one-day sell-off, everyone seems to decide collectively that it is the beginning of a multi-day selloff, which is perfectly reasonable given earnings uncertainty, as well as the elevation of prices into the end of the first half.

Did Yelp (YELP) deserve to go back to $80? Perhaps no more than it deserved to be in the low $50s, unless you get a takeover bid.

Did Salesforce.com (CRM) go too high? I don't think so, but there are plenty of intrepid souls who don't want to give up the low-$50s gains.

Still, these are all "trading flow" stocks and not much more.

The only really nagging earnings news is the estimate cuts in the airlines and, frankly, I don't even know if they will be warranted if oil keeps coming down. Travel is strong; we know that from hotel rates and Priceline (PCLN). The airlines had been the best-performing group for months on end, so any chink in the armor can hurt -- but I am still not sure how big it is.

Still, no one wants to get in front of the beginning of a big decline, even if it isn't one. Even if it is just a couple of big sellers or exchange-traded funds linked to the momentum stocks. It's still worth selling small and waiting.

But, to me, if you think a company is going to get a takeover bid and it has reasonable fundamentals, then this is your chance.

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