A Peculiar Mix of Action

 | Jul 16, 2014 | 4:20 PM EDT
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The indices continue to act quite well but under the surface is peculiar mix of action. The big movers today looked much like something we'd see back in the 1990s: Intel (INTC), Microsoft (MSFT), IBM (IBM) and Cisco (CSCO) were key leaders and we even had talk about a takeover of Time Warner (TWX), just like in 2000.

Unfortunately, small-caps lagged badly again. Nasdaq breadth was solidly negative but the index was up primarily due to INTC and MSFT. Biotechnology acted poorly for the second day after the Fed chief Janet Yellen's comments on valuation. Strength in banks and chips helped to boost the S&P 500, but momentum stocks were generally poor with little inclination to chase. Tesla (TSLA), for example, completely gave back its good-sized gain from Monday and Apple (AAPL) is losing steam after just about every analyst increased targets lately.

My biggest concern about the market action continues to be the paucity of perky charts. I run through hundreds of charts each day and there just isn't much life in them. Many look OK but aren't moving much. I'm always looking for the hot pockets of action, and there are very few good themes or sectors now. The bias is definitely moving toward more conservative big-caps and that is always worrisome.

Overall, the big indices look fine but the action under the surface has a number of flaws. It isn't anything that serious, but it is making it tough to be aggressive with trades.

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

July 16, 2014 | 10:07 AM EDT

Small-Caps Disappoint Again

  • Even as the market is off to a good start.

The market is off to a good start this morning but the tendency lately has been to drift around and act lifeless following a good start. Breadth has already moved down toward flat and traders are selling into strength. Gold has bounced a bit but Fed Chair Janet Yellen's comments yesterday are still hurting the biotechnology sector.

Yellen is on deck again this morning in the House of Representatives. There is always the potential she could say something to move the market, but she is being careful about any surprises.

Most notable on my screen this morning is the continued underperformance of small-caps. They have been lagging for a while and continue to do poorly. That is primarily a function of a lack of speculative interest. There's no inclination to be more aggressive with risk. The game plan is to move into big-caps as a function of upward pressure on interest rates.

I've done a couple of quick flips this morning but continue to find very little of interest to sink my teeth into. Speaking of teeth, I'm heading to the dentist and won't be checking in until later.

July 16, 2014 | 7:56 AM EDT

The Bulls Have the Ball

  • But they aren't doing much with it for the moment.

"Lethargy breeds lethargy. It means the more you lie around doing nothing, the more you want to lie around doing nothing. Your limbs and your mind feel so heavy that it becomes a major effort just to lift your arm to channel surf."

--Neal Shusterman

A strong earnings report from Intel (INTC) and better than expected GDP in China have the indices gapping up this morning. After a lethargic session on Tuesday, market players are embracing the positives this morning -- but can they gain better traction this time?

While the indices continue to hover around all-time highs, the problem with the market lately is that there hasn't been much energy intraday. On Monday, we gapped up in the morning but then flat-lined the rest of the day. Yesterday we had a positive open and then drifted lower. There just isn't much momentum or follow-through when we do have positive action.

Small caps have been the biggest trouble spot lately. Speculative interest has dried up and the IMW has been consistently underperforming. Big cap momentum names have also been very mixed. There is little that is standing out, while money seems to prefer safer, more conservative names lately, like Microsoft (MSFT), Mylan (MYL) and MasterCard (MA).

The bulls point out that the indices are acting just fine and the uptrend is fully intact. They view the complaints as nitpicking a market that is still exhibiting many positives. The indices are definitely in decent shape but, like back in March and April, some of the underlying action is showing signs of problems. Part of it is the fact that we are in the slower summer season and there is slowing volume and interest; but there are also some signs of rotational action taking place.

What we need is for the market to build on the good news from Intel. We have also had good earnings from banks. Yahoo's (YHOO) report is producing some downgrades, and Janet Yellen spooked the market a bit with the comments about valuation of biotechnology and social media, but there aren't any major negatives right now. We just are slow and lethargic.

The open this morning will be a good test of how much energy the bulls can produce. They have some positives to work with and expectation will increase for upcoming earnings reports after Intel. We need to build better momentum to produce a better environment for stock pickers.

My biggest complaint about this market is that individual stock picking has become quite difficult lately. Part of it is the choppiness of things like Tesla (TSLA) and part of it is the underperformance of small caps. I actually had to pick MSFT as a technical buy recently, which isn't a stock that I usual pay much attention to.

Overall the market trend is up, but the price action is slow and inconsistent. The bulls have the ball, but they aren't doing much with it. Let's see if they can build on this open.

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