The Market's Tone Is Positive

 | Jul 22, 2014 | 4:22 PM EDT  | Comments
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Stock quotes in this article:

cmg

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aapl

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msft

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tedu

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bdsi

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code

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leju

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pxlw

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tsem

A gap-up open and strong breadth produced nice gains today, but the action was flat again intraday. The indices closed close to where they opened, which, again, demonstrates solid underlying support.

If the recent pattern holds, the market should gap down in the morning and then bounce back a bit. The last three positive days, like today, were followed by weak action the next day. We have had a positive bias overall, but it isn't the V-shaped action that the bulls enjoyed so often the past couple years.

Key earnings reports are hitting and that should help set the tone. The good report form Chipotle (CMG) helped quite a bit today. Microsoft's (MSFT) numbers are out and are mixed. Profit missed and revenue is ahead, but it is all about the guidance.

Apple (AAPL), of course, will be quite interesting. Analysts have upped their expectations lately and there should be plenty of talk about upcoming products. The stock is set up fairly well technically, and they always love to love AAPL if they can provide good reasons.

While the overall tone of the market is positive, we still don't have much energy. The bears are convinced that it is foreshadowing problems right around the corner, but underestimating the ability of this market to keep moving higher has been an easy mistake for a very long time.

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


July 22, 2014 | 1:39 AM EDT

The Bulls Keep Pushing

  • And there is no edge to the short side.

TEDU, BDSI, CODE, LEJU, PXLW, TSEM

The tendency of the market lately has been to make its biggest move in the first hour of trading and then drift around the rest of the day. We have seen extremely tight intraday ranges recently, which is even more boring than usual because volume is so light.

Breadth has slipped a bit from earlier levels but this is the most positive action we have seen in a couple of weeks. There is better momentum and a bit more aggressiveness in small-caps and big-cap momentum names. I suspect that the market is anticipating decent reports tonight from Apple (AAPL), Microsoft (MSFT) and a few others to keep sentiment positive.

The biggest challenge of this market lately has been the lack of follow-through. The last three times the S&P 500 had positive days, it gave back most of it the next day. We have not seen the sort streaky V-shaped action that was so prevalent for so long.

It continues to be difficult to be aggressive today but I've added Tarena International (TEDU) and BioDelivery Sciences International (BDSI), though my positions are small. There is nothing wrong with this market other than a lack of energy at times. The bulls are still pushing and there really is no edge to the short side.

LINE

 

July 22, 2014 | 10:18 AM EDT

Bulls Have the Ball

  • So far this morning, they are doing a very nice job.

The tendency of the market lately has been to make its biggest move in the first hour of trading and then drift around the rest of the day. We have seen extremely tight intraday ranges recently, which is even more boring than usual because volume is so light.

Breadth has slipped a bit from earlier levels but this is the most positive action we have seen in a couple of weeks. There is better momentum and a bit more aggressiveness in small-caps and big-cap momentum names. I suspect that the market is anticipating decent reports tonight from Apple (AAPL), Microsoft (MSFT) and a few others to keep sentiment positive.

The biggest challenge of this market lately has been the lack of follow-through. The last three times the S&P 500 had positive days, it gave back most of it the next day. We have not seen the sort streaky V-shaped action that was so prevalent for so long.

It continues to be difficult to be aggressive today but I've added Tarena International (TEDU) and BioDelivery Sciences International (BDSI), though my positions are small. There is nothing wrong with this market other than a lack of energy at times. The bulls are still pushing and there really is no edge to the short side.


July 22, 2014 | 10:18 AM EDT

Bulls Have the Ball

  • So far this morning, they are doing a very nice job.

Over the last seven trading days, the market has been in an "up, down, up, down" pattern. After Monday's negative action, it's the bulls' turn on Tuesday, and so far they are doing a very nice job. Breadth is very strong at close to 4-to-1 positive, and biotechnology and solar energy are leading the charge.

The big stumbling block for the bulls lately is that there has not been much sustained momentum. We see good support intraday, but not much chasing -- and then the "up, down" pattern hits the next day. The action isn't negative, but it is tricky to trade.

The most notable trading action on my screens is coming in the form of strength in China names. Stuff like 58.com (WUBA), Kandi Tech (KNDI), Dangdang (DANG) and Leju (LEJU) are attracting attention. We also have some chip strength and I'm playing Pixelworks (PXLW), Tower Semiconductor (TSEM) and Spansion (CODE) in that group.

The market has had a tendency to not do too much intraday of late, but so far we are seeing some good interest.


July 22, 2014 | 8:01 AM EDT 

A Frankenstein Market?

  • It's had a tendency to come back to life after these bouts of lethargy.  

Opportunity is missed by most people because it is dressed in overalls and looks like work. -- Thomas Edison

After an extremely slow day on Monday the market has some life this morning as worries about Ukraine eased and some good earnings, especially from Chipotle (CMG), were posted. 

The market has been painfully slow lately, but it continues to see good support and has consistently bounced back from early weakness. The main concern lately is that, while we aren't falling apart, we aren't making much headway either. There is plenty of churning and not many pockets of momentum to entice traders.

The bearish spin on things is that this is stalling action and an indication that a top is forming. The problem with that argument is that it seldom has worked that way in recent years. Typically slow, drippy action. I suddenly forgot and the market is on its way again to new highs.

The bears claim that this time it is different. The Fed is intent on tapering and it is only a matter of time that stimulus will be withdrawn.  In the past we always had a new round of Fed action to keep the market running, but this time there is not going to be another round of QE unless the economy really does fall apart.

The bears also point to the recent underperformance of small-caps and many momentum stocks as an indication that speculative interest is dropping. We don't have much good, quality leadership and there is movement toward safety stocks. It happened back in March and April also and led to some very poor action under the surface.

The bullish spin is that nothing much has changed. The market is simply taking a well-deserved rest after a good run and is suffering a bit from slower summer seasonality. There is still no significant selling and there is plenty of dip-buying interest. While there may not be much leadership right now, the market has had a tendency to suddenly come back to life after these bouts of lethargy. 

The biggest mistake over the last few years is to be too defensive when the market is struggling and then to be left out when we suddenly bounce back without any warning.

While the market continues to hold up fairly well, the biggest challenge has been that there aren't many good trade setups. The problem is that there isn't enough momentum to keep things moving. Spikes fade quickly and there isn't a strong desire to chase. It is a frustrating market for traders who want to be more aggressive.

The good news is that earnings are looking pretty good, with CMG exploding higher on a great report. Apple (AAPL) and Microsoft (MSFT) report tonight, which should help to stir things up a bit.

The market is in OK shape, but if we are going to knock out some good trades we really have to work hard to find good setups. Earnings should help to create some volatility, but this is not an easy market to trade right now.

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