The moves are so exaggerated and they make so little sense. Why does Lockheed Martin (LMT) open up almost $3 -- and then plunge. Why does ULTA Salon (ULTA) go lower and then zoom up 5%?
Why does Bank of America (BAC) look like it is going to open up 2%, and then come down hard.
Why does Eli Lilly (LLY) rally big on old news about a new drug?
What makes Domino's Pizza (DPZ) sell off and then roar higher?
Volume. Or lack thereof. There is a ridiculous confluence going on, right now. You have actions taken by management that spur actual buying. You have the S&P reflecting China -- and possibly the Fed, if oil is benign. And it causes immense selling pressure if oil drops, because then we are worried about Freeport McMoRan (FCX), Chesapeake (CHK), and their compadres.
The stocks that are most levered to oil -- the consumer spending stocks -- drop hard on any bad news in oil.
The fact is that they can drop hard because there are not enough fundamental buyers of individual stocks. In fact, the actions of the individual companies often mean nothing.
For example, we just bought some Dow Chemical (DOW) for the Action Alerts Plus portfolio. It yields more than 4%. It has ample coverage. It is doing quite well and is in a terrific merger with DuPont (DD).
But oil has fallen 20% this year -- and somehow the market has pegged DOW as an oil stock, so not only does the merger not matter but the stock gets hit with selling from all sides of the spectrum.
It wouldn't, if institutions that used to be reliable buyers of stock were in there doing the homework and buying the good stories while selling the bad.
That's not how it works anymore, though, so it doesn't matter.
And you get this ridiculous market as a function of there being no real players there to buy the other side of the futures trades.