Once again, the market acted poorly but managed just enough positives to prevent any widespread fear. The indices were solidly red but finished off the early lows, and breadth improved to about 2600 gainers to 3150 decliners, which isn't that bad. There continued to be some pockets of strength in biotechnology, with names like Trillium Therapeutics (TRIL), Esperion Therapeutics (ESPR) and Eagle Pharmaceuticals (EGRX) running, but overall the momentum was pretty limited.
It doesn't make for very interesting trading, but it isn't so poor as to push us into a full-fledged downtrend. We are in position to test the market lows with another poor day or two, but there has been enough support so far to keep the bulls optimistic that this is just a temporary blip.
We have the long weekend coming up, which means tomorrow will likely be thinner than usual. Volume has really been drying up lately and I'm sure there are many traders who will find a good reason not to participate tomorrow. The good news is that the day before the Good Friday holiday does tend to have a positive bias, but this market has been a tough slog lately without a lot of volume or energy.
I'm not a big fan of this market right now because of the lack of opportunities, but that is the nature of the beast at times. Just stay with it and things will change.
Have a good evening. I'll see you tomorrow.
April 1, 2015 | 2:19 PM EDT
Some Juice in a Slow Market
- · Some momentum stocks are moving.
We have some dip buying support, and traders are wondering if maybe the start of the new month combined with the positive tone around a holiday may give this market a little juice. It sure could use something. Otherwise, traders may head for the exits and start the three-day weekend early.
Breadth is still running 2,550 gainers to 3,100 losers with oil and solar energy leading. Biotech is off the early lows, but retail, drugs and chips are struggling. A few momentum names are moving, such as Esperion Therapeutics (ESPR), Trillium Therapeutics (TRIL) and Eagle Pharmaceuticals (EGRX), but nothing in the high-beta, big-cap area is doing much.
Apple (AAPL) finally turned green after doing nothing on an upgrade earlier, which may be a sign that bored traders are looking to push a bit. It is a very tough environment for individual stock picking, and so if you are going to give it a go, make sure you are selective and managing things tightly.
The close today will help to set the tone, but don't forget that seasonality and the long week ahead issue result in a positive bias. This market has some negatives and is a bit slow, but it looks like we may have enough buyers to prevent downside momentum from building.
APR 01, 2015 | 10:28 AM EDT
The Dark Side's Coming
- If you are inclined to short, now's a good time to stalk plays.
The first days of April have historically been positive, but the market isn't reading the history books this morning. It is ugly, with momentum and biotechnology names leading to the downside. Gold and bonds are strong, which isn't a show of conviction, and there's a little bounce in oil, but there are few places to hide in equities today.
I've been complaining about the lackluster energy and the paucity of perky picks lately, but the price action indicates the market has problems. It is understandable that you might be a bit more optimistic if you have stayed focus on the indices. The indices have covered up issues under the surface lately and, as I discussed in my opening post, the ranks of leadership are not robust at all.
I'm not going to predict more downside momentum, but the way the market is acting demands caution. There is not enough positive price action in individual stocks to support a positive view. A couple of names -- Twitter (TWTR) and Esperion Therapeutics (ESPR) -- are acting well, but even they have faded after gapping up.
Actually, some shorts working better. My Stock of the Week was a short of Qihoo 360 (QIHU), and Celgene (CELG) was a Shark Technical short last night. It is been a while since the dark side has offered much, but more setups are now developing.
Our job is not to let losses get out of hand while we patiently await better price action. If you are inclined to short, it's a good time stalk potential plays.
April 01, 2015 | 7:27 AM EDT
All About the Central Bankers
Theme of the second quarter? Same as the first.
"Nobody can go back and start a new beginning, but anyone can start today and make a new ending."
The first quarter of 2015 is now in the history books. It was marked by a high level of inconsistency and, unsurprisingly, was driven in large part by central bankers. In Europe, the European Central Bank began its quantitative easing program, and in China, the central bankers rolled out various stimuli. The dovish action around the world helped offset the ongoing debate in the U.S. about when the Fed would finally start raising interest rates. So far, the market has been relatively sanguine about the likelihood of higher rates, but there is enough concern to keep the market choppy.
Low oil prices and the danger of deflation helped to prevent any overt hawkishness by Janet Yellen, but Fed members, such as Jeffrey Lacker, keep raising the potential for rate hikes as early as June. That is causing the market to chop and not gain much traction.
Central-bank actions will continue to be the theme in the quarter ahead. The bears have been waiting for years for a more hawkish Fed to be the catalyst that finally produces a deeper correction. There are signs that the market is worried about that potential, but so far, there has not been any meaningful technical damage.
We have first quarter earnings rolling out starting in about a week and that is going to be the market focus. Expectations are low as, overall, there is not much growth in corporate earnings, but at least the market will have something to react to. The focus on macroeconomic issues such as Greece has grown tiresome and the market seems weary of the news flow.
While the indices are still holding about the recent lows, there are concerns. Most notably we have had quite a bit of technical distribution, which simply means that the market is selling off on higher volume. The thinking is that that sort of action is a tipoff that institutions are selling. It hasn't been severe enough to result in a downtrend, but it has been weighing on upside momentum.
The other issue is market leadership. Biotechnology has been the champ for quite a while, but the group has suffered a few hiccups lately and is becoming increasingly volatile. A few key momentum names have stepped up lately, such as Facebook (FB) and Twitter (TWTR) but it has been very thin and random leadership.
The key themes in the market for the first quarter were biotechnology, solar energy and semiconductors. We need key names to step up and lead this market in the second quarter. Quality leadership is the essence of a good market and right now that is looking a bit problematic.
Overnight action was choppy on poor economic news out of Asia, but continued talk about more moves by central bankers bounced things right back. We have a flat-to-slightly down U.S. open on the way.
This market has not been offering a very good supply of trading opportunities lately, but if we keep working at it, they will eventually come.
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