• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

The Bears Are Armed

Many think the market is on the verge of a long-awaited correction.
By JAMES "REV SHARK" DEPORRE
Jan 28, 2015 | 04:28 PM EST
Stocks quotes in this article: AAPL, TSEM, PLNR, HIMX, BLUE, SMCI

Market players have come to expect a very dovish Fed but today Janet Yellen and the gang disappointed. What the market wanted was some reassurance that interest rates wouldn't rise soon. Many economists feel that 2016 is a more reasonable target but all that the FOMC offered was some vague comments about evaluating incoming data and the likelihood that a hike wouldn't occur for a couple of months. That simply was not enough to satisfy this market.

Part of the problem is that the market has exhibited quite a bit of instability since the end of December. It is quite a change in character. The conventional wisdom is that swings like this are an indication that market players are experiencing increased uncertainty, which often leads to a change in market direction.

The bears are loaded up with ammunition right now as oil, currencies, interest rates and economic news is in a state of flux. Many players think the market is now on the verge of the long-awaited correction that has been anticipated for years.

Technically, the indices still hold above recent support levels but another retest has increased odds of failing. We are not in a downtrend at this point but there is obviously some worrisome price action. Apple (AAPL) helped the bullish cause a bit and dragged up some chip stocks, but by the end of the day breadth was down to 1,500 gainers to 4,400 losers. That certainty is a sign that downside momentum is building.

Facebook (FB) numbers are out and it is trading around flat so far. We have a slew of reports on the agenda and that will help determine the mood. With the exception of AAPL, there hasn't been much to celebrate.

Be careful; it is becoming increasingly choppy and inconsistent out there.


Jan. 28, 2015 | 2:25 PM EST

The Fed Offers Nothing Solid

  • But the final hour of trading will tell the tale.

The Federal Open Market Committee's interest rate announcement is out and it contains nothing very solid. The gist is that the Fed will be "patient" and will evaluate new information as it comes in before making any moves. There is no clear indication that rate hikes will be pushed out, although many economists now believe it is unlikely we will see a hike before 2016.

The reaction to the news is very mild so far as there isn't anything that is overtly hawkish or dovish. I'm concerned that the market will have a bearish bias and that the Fed announcement isn't going to do anything to shift that. We have a very slight downside drift, but it the final hour of trading will tell the tale.

Oil is being pummeled and breadth is now negative. Select chips and Apple (AAPL) are the bright spots but the underlying support for the broader market looks precarious. I've been taking some profits today and I'm moving to a slightly more defensive stance.

The Fed didn't give the buyers much of a reason to buy, and that has me concerned.


Jan. 28, 2015 | 10:23 AM EST

Apple Quiets Fed Jitters

  • But look for volatility to increase as the announcement nears.

Apple (AAPL) is chugging along nicely and that is causing a great celebration. No other stock is as beloved as Apple, and it has a very strong effect on sentiment in the short term.

Outside of Apple, it is mixed action with a positive bias. Breadth is running 2,800 to 2,300 positive with good strength in chips, biotechnology and retail. The chip sector is likely benefiting from Apple sympathy. Gold and oil are lagging.

The FOMC interest rate decision is at 2 p.m. ET and we are likely to see volatility as market players position for the news. There are expectations that the Fed will push back potential interest rate hikes; if they are not clear about that, it may cause problems. On the other hand, if they do suggest that hikes are being pushed back we could see a very positive reaction. The consensus seems to be that the Fed will remove the "considerable time" language completely and will be quite vague about timing.

I'm trying to do a bit of positioning into the strength. Recent buys such as Tower Semiconductor (TSEM), Planar Systems (PLNR), Himax Technologies (HIMX), bluebird bio (BLUE) and Super Micro Computer (SMCI) are acting well and I'm inclined to take partial profits.

The Russell 2000 is the laggard today after leading yesterday, which I don't like to see. It suggests to me that market players are gearing up to sell on the Fed news. It is a mistake to underestimate how much this market tends to love the Fed no matter what it does, but I'm cautious this time as the usual vagueness may be a negative.


Jan. 28, 2015 | 7:29 AM EST

Attention Quickly Moves from Apple to Fed

  • The decision will give us important clues as to overall market direction.

You have to be burning with an idea, or a problem, or a wrong that you want to right. If you're not passionate enough from the start, you'll never stick it out. -- Steve Jobs

After poor action on Tuesday, a very good earnings report from Apple (AAPL) is helping the mood. But the focus will quickly turn to the FOMC interest-rate decision this afternoon. Speculation is growing that the Fed will push back potential rate hikes, with many economists not expecting rates to rise until 2016.

While the market generally loves a dovish Fed, there is some concern this time that a delay in unwinding quantitative easing is an admission that the economy is much weaker than the Fed has been projecting. In addition, lower oil, the ECB QE program and economic struggles around the world are pushing interest rates even lower. There are even arguments that the big problem is deflation rather than inflation. Overall, there just isn't any big reason for the Fed to start rising rates other than to try to maintain its credibility.

The Fed decision comes at an interesting time as earnings reports, other than the mighty AAPL, have been quite poor. Even AAPL mentioned some currency headwinds, but its huge sales and margins offset any issue. It may not be nearly that easy for many other companies that are reporting.

A number of market players viewed the action yesterday as quite significant and there are more and more pundits who think that the market is very close a significant top. Of course, these pundits have been saying that for years. But they are becoming increasingly loud about their pessimism, especially as market volatility picks up.

There hasn't been much talk about the Fed decision today, but the reaction to it is going to give us some important clues as to overall market direction. The market has always reacted favorably to a dovish Fed and c. If there are hints that rate hikes will be delayed and we don't see a big positive reaction, it will be a major change in character.

One of the more interesting developments yesterday was outperformance by small-cap stocks. As a result, overall market breadth wasn't that bad. That is probably a function of money moving from big multinationals with currency exposure to smaller stocks that don't have that problem. It is intriguing news for stock picks and the increased volatility is making for some interesting trading.

Earnings, the Fed, low oil, European QE and a host of macro issues is making for a very interesting market. The bears are correct that the conditions for a market correction are building, but it has very seldom paid to be overly anticipatory when there is a central banker that can be even more dovish.

Some huge target increases are driving AAPL higher in the premarket, but futures are flat. Stay on your toes.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Rev Shark was long AAPL, TSEM, PLNR, HIMX, BLUE and SMCI, although positions may change at any time.

TAGS: Investing | U.S. Equity | Stocks

More from Stocks

Let's Shine a Light on Lucid Motors as It Slides Downhill

Brad Ginesin
Jul 2, 2022 1:00 PM EDT

LCID's market cap has been deflated, so is it now a bargain, or can it slip further?

Stop Wishing, Hoping and Praying and Take Control of Your Investing

James "Rev Shark" DePorre
Jul 2, 2022 10:00 AM EDT

The most powerful thing an investor can do is embrace the idea that they don't know what the future holds.

If You've Got Time, These Three Dividend Aristocrats Should Pay Off

Bob Ciura
Jul 2, 2022 7:30 AM EDT

There high-growth dividend stocks will be here over the long haul.

Welcome to Second Semester on Wall Street, Here's How to Make the Grade

Jim Collins
Jul 1, 2022 4:36 PM EDT

Think you can own big tech? You might just get an 'F' for that. Here's what will get you on the other side of this year.

We Got a Break, but the Heat Is Still On

James "Rev Shark" DePorre
Jul 1, 2022 4:22 PM EDT

A limited rally cooled some of the negativity on the market, but guess what's going to hit the fan soon?

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • 07:59 PM EDT PAUL PRICE

    Very Good Quarterly Numbers From Bassett Furniture (BSET)

    Bassett Furniture blew right through analysts es...
  • 04:41 PM EDT PAUL PRICE

    First-Half Results - Putrid; Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 mark...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login