The bulls did a nice job of buying early weakness today, but the bears finished strong as the indices faded into the close. The indices ended up close to flat but breadth was skewed negative, and other than Netflix (NFLX), Panera (PNRA) and some junk China names, the pockets of momentum remained thin.
A poor finish always has some negative connotations, but the main takeaway from the action today is that the bears still can't dig their claws into this market. They had an opportunity to push us lower this morning but were unable to generate any traction, and the volatility this afternoon was more machine-driven than bear-driven.
Surprisingly, the market didn't have a stronger reaction today to endless comments from Fed members. For the most part, they offset each other as they continued to speculate about the timing of potential rate hikes. The one thing that does seem clear is that they see enough positives to justify making a move this year. There are some major market players who think the Fed will be on hold until 2016, and the market sure doesn't seem nervous about it, but you can bet that when we do have some major downside pressure, it is going to be due to some sort of hawkishness from the Fed.
The indices didn't do anything today, we closed poorly and the action remains slow, but the bulls still maintain an edge. The fact that the bears can't better capitalize when handed an opportunity means we need to maintain a positive bias.
Have a good evening. I'll see you tomorrow.
April 16, 2015 | 1:21 PM EDT
Where's the Dumb Money?
- ·This market needs people to do the wrong thing at the wrong time.
What is most notable about the market action today is how difficult it is for the bears to gain any downside momentum. It simply isn't possible to scare people out of this market. In fact, legions of buyers are sitting on the sidelines hoping and praying for a panic that they can buy into. Buying negativity has worked so well for so long that even those who don't trust the market are still willing buyers.
The financial engineering of the central bankers has caused a complete change in the way sentiment operates. We don't ever see real extremes in emotion. There is no real euphoria and panic doesn't last more than a few minutes. If you have tried to time market turns based on extremes in sentiment, the results have been completely random.
To start the day it looked like this market was ready for some resets, as it's run up on light volume for a couple weeks. It did look a bit shaky in the early going but never made intraday lows after the first hour and that was all that was needed for buyers to provide support. Breadth is still negative, but the important thing is that we have greater interest in trying to buy weakness than we do in trying to escape positions due to fears the market is turning.
In the "old" days, market sentiment used to shift sharply as fear and greed came into play. In the current market, traders consider the movement without passion and hope that there are still human beings out there doing the wrong thing at the wrong time to offer an opportunity. Unfortunately, there doesn't seem to be any dumb money left to trade against.
April 16, 2015 | 10:26 AM EDT
The Pressure Mounts
- But this market is not going to roll over easily.
We have a mood shift this morning, as buyers have decided to stop chasing a low-volume walkup. The lack of vigor behind the recent move has sapped confidence, but the consistency of the buying has helped to keep the bears on defense. This morning Greece provided some headwinds and oil lost some of its recent momentum, which seems to be enough to create pressure.
Breadth is running 1,950 gainers to 3,100 decliners, but most notable is the lack of strong sector leadership. Netflix (NFLX) and Panera (PNRA) are attracting all the momentum interest, while few other pockets of momentum are active. One group of interest is network and computer security, as CyberArk (CYBR), Tableau Software (DATA), Vasco Data Security International (VDSI) and a few others in that group act better.
Twitter (TWTR) is exhibiting a little relative strength, and I've remounted some shares as it looks like support around $50 is solid. I continue to like the way Tower Semiconductor (TSEM) is setting up and we have interesting technical action in solar energy names like SunPower (SPWR).
The dip buyers are starting to show interest as the bears scoop up pennies and give up again. This market is not going to roll over easily.
April 16, 2015 | 7:54 AM EDT
An Old Friend Has Been Back
- The V-shaped bounce's persistence has been impressive.
"The winner ain't the one with the fastest car, it's the one who refuses to lose."
It hasn't been quite as energetic as in the past, but our old friend, the V-shaped bounce, has been hanging around for a couple of weeks now. Yesterday it gained a little more steam, as it pushed back toward the highs and caused some underinvested bulls to capitulate and start buying. This V hasn't been as strong as the one we saw back in February, but it is the persistence, despite light volume and other deficiencies, that make the V-shaped bounce so impressive.
Higher oil prices and a positive reaction to Intel's (INTC) earnings received much of the credit for the upside action, but we also had weak economic news, which is keeping the central bankers in a dovish mood, to help propel us higher. The bears are still grumbling about all the negatives that the market is ignoring. For some reason, they still can't seem to grasp the fact that big-picture negative arguments don't work when you have central bankers still providing buckets of cheap cash.
I have to admit that I've struggled with embracing this most recent bounce. I have to push myself to not fight it, but the lack of energy has sapped me of trust. There simply has not been a very good supply of the setups I'd like to see. We have had some speculative action in China junk names, and the biotechnology stocks just won't quit, but it has been extremely dull action, with very little big-cap leadership.
Last night Netflix (NFLX) blew the doors off with its earnings report, which is exactly the sort of big-cap leadership you'd expect to see when the indices are heading for new highs. We also had a very positive response to an Intel report that looked just average. Banks are also seeing a good response to earnings news, and helped to lead the market higher.
Many were anticipating that earnings season might be a disappointment due to currency issues caused by the strong dollar, but so far things are coming in well above expectations, and that is what is driving the action.
This morning we have the circus that is Greece putting some pressure on things, as the yield on three-year notes moved above 27%. Concerns are growing that Greece will be unable to make its deadlines, but creditors are tired of the delays and are not willing to talk about further delays.
In addition to Greece, we also have news that China's fiscal revenue growth has slowed down to 3.9% in the first quarter of 2015, from 8.6% last year. That is an amazing level of decline, but China stocks continue to surge on confidence that the central bankers are going to be riding to the rescue with even more stimulus.
The market has been doing a great job recently holding off any and all negatives. The bears are focusing on Greece this morning, but we all know how the pattern of saving Greece over and over again keeps providing fresh fuel.
This market has lacked energy and good setups, so a pullback to start the day may be welcome by both bulls and bears. Just keep in mind that there has been good underlying support, and it doesn't tend to go away too quickly.