The indices held steady and the Nasdaq even managed its ninth straight positive close, but it was a sloppy day of trading.
We had some big reversals in leading biotechnology names and a sharp drop in the cybersecurity sector, which has been a hot group lately. There was another machine-driven upward spike in the final minutes of trading that helped the mood, but it was a mixed day with a few negatives, though nothing significant enough to change the fact that the indices are still uptrending.
Of course, the bears will be looking for a "sell the news" reaction to Fed Chair Janet Yellen's testimony before the House Finance Committee tomorrow morning. They haven't yet learned that the market loves to love the Fed, and Yellen is unlikely to say anything that will upset things.
Overall the market is still a bit extended on lackluster volume, but you simply can't find the momentum even when it doesn't appear all that strong. It wouldn't be bad at all for the market to churn a bit and consolidate, but typically the buyers just aren't patient enough for that to happen.
In addition to Yellen, we still have to hear on the Greek loan extension. That was delayed but the market doesn't seem too concerned. It is very likely the Greece situation is not resolved, but it is old news at this point.
Be ready for lots of Fed talk tomorrow as Yellen dances around the issue of the timing of interest rate hikes. The likelihood is she will be sufficiently vague and the market will be pleased.
Have a good evening. I'll see you tomorrow.
Feb. 23, 2015 | 1:51 PM EST
Soaking Up Some Solar Stocks
- · First Solar and SunEdison are acting well despite weakness in oil.
The buyers have done a nice job of moving the market off the morning lows, but breadth is still weak and there are quite a few landmines, like CyberArk Software (CYBR) and Tesla (TSLA). The momentum screens are lagging, although biotechnology remains the highlight of the action.
The action continues to look like little more than routine profit-taking after a good run. We still have good underlying support, and we aren't seeing bids suddenly disappear. With Janet Yellen testifying the before the House and the Senate this week, market players are hopeful that there will be a continuation of the recent dovish tone.
This action has required some defensive moves today, but I'm looking to add. At the top of my list is Tower Semiconductor (TSEM), an old favorite that had an exceptionally strong earnings report this morning and is still trading at a very low multiple. It is now challenging its January highs on a very big surge in volume, a pattern commonly known as a "pocket pivot." I've added some and I'll be looking for more entries.
First Solar (FSLR) and SunEdison (SUNE), two solar plays, are acting well despite weakness in oil. I may look to add depending on the overall market action.
We shall see how the market closes, but the action now isn't too worrisome despite pockets of problems. Just remember that Janet Yellen has a tendency to be very market friendly.
Feb. 23, 2015 | 10:38 AM EST
This Looks Like Routine Selling
- Worry a bit if you see new lows later in the day.
The dip buyers are moving slowly this morning, but the pattern for the last eight days has been to buy the early weakness. We no longer have the anticipation of a "Greece is saved!" headline to give the buyers an excuse, but with Janet Yellen on deck tomorrow, market players are unlikely to be too bearish.
This market is technically extended on low volume, so it is healthy to have a little selling pressure to shake out the flippers and the weak hands. If we start making a series of new intraday lows, it will be of concern, but right now this action is more of a positive than a negative.
Breadth is running not quite two-to-one negative, and once again it's biotechnology that is the safe haven. The bluebird bio (BLUE), Juno Therapeutics (JUNO), Kite Pharma (KITE) group is leading, and we also have quite a bit of speculative interest in the low-priced biotechnology names once again. Names like CorMedix (CRMD), Halozyme Therapeutics (HALO), ZIOPHARM Oncology (ZIOP), Advaxis (ADXS) and MEI Pharma (MEIP) are attracting interest.
The pattern is early weakness and afternoon strength. If we start seeing new lows later in the day, it may be time to worry a bit, but so far this looks like little more than routine selling after a good sized run up on low volume.
June 25, 2014 | 8:43 AM EDT
Don't Worry About the Big Picture
- And stay focused on stock-picking.
"Maybe you don't have to push yourself forward. Maybe you just have to stop holding yourself back." --Doe Zantamata
On Friday the market capped off a slow but steady weak of gains with new highs on the news that a deal had been made between the European Union and Greece. There are still some major unresolved issues and the likelihood that the issue is solved once and for all is remote; however, it satisfied the market that progress had been made and that there was no immediate danger of the EU falling apart.
We had very consistent bullish action all of last week. We'd start off a bit slow and even would dip a bit but the underlying support would quickly kick in and trend upward with help from the constant talk that Greece would be saved at any point. Most everyone agrees that the Greece issue had taken on an unrealistic amount of importance but it made for a convenient trading catalyst especially as buyers looked for something positive to justify buying.
We have seen market conditions like we have now numerous times in the last few years. We have been going straight up and are extended on light volume, but if you have been focused on overbought technical conditions you have been on the wrong side of this market. It simply has been a mistake to try to fight the uptrend regardless of how poor it may look based on volume and other technical conditions.
Not only has the technical health of this rally been problematic but the underlying action hasn't been all that great either. We had a little over 300 new highs on the NYSE and Nasdaq combined on Friday, as the indices hit new highs, which isn't a very impressive number for a market this strong. The leadership groups have been narrow as well, with cybersecurity and restaurant names being the main groups with momentum.
Probably the most intriguing trading action last week was in lower priced biotechnology stocks. Many of these are just story stocks with no earnings or even revenues but they have attracted traders looking for speculative action. The moment in these "junk" stocks is partially a function of the fact that there just isn't that many good setups out there for traders to choose from.
So now what? Do we start to look for a market top as the Greece issue finally becomes less important? It is likely we are going to substitute that issue with more focus on the Fed and the timing of future interest rate hikes. Janet Yellen testifies Tuesday and Wednesday before the House and Senate, and that is going to cause plenty of speculation about Fed timing. The market tends to spin Yellen's comments in a dovish manner, but we are likely to see some bouncing around as the issue of interest rates turns to the forefront.
My game plan continues to be to stay focused on individual stock-picking and not worry too much about the big picture issues. The way to navigate this market has been to ignore the obvious macro issues and stick with the trend as long as possible.
We have some slight weakness in the early going, which is caused in part by a pretty good hit to oil. Overseas markets are mixed and there are concerns about how well the Greece deal will hold together.