The indices didn't put up big numbers and we closed a little weak, but it was another solid day of gains for the market. Breadth approached positive by 2-to-1 and there were some good movers on earnings news despite the stumbles by Facebook (FB) and General Motors (GM).
We will see some headlines in the business media about how the Nasdaq took out its all-time closing highs from 15 years ago. While we may be at the same levels again, that is about the only thing that is the same. The emotions today couldn't be more different. There is very little of the euphoria or excitement that existed back then, and buyers act like they are being forced to invest in this market.
This is a market driven by financial engineering and computerized trading rather than emotions, but that doesn't make the gains any less real. Too many people have refused to embrace this new world, which is part of the reason it continues.
Some key earnings reports are hitting and look quite positive so far. Google (GOOGL), Starbucks (SBUX) and even Microsoft (MSFT) are trading up, while Amazon (AMZN) did a quick gap and reverse. Earnings-season expectations have been low and the impact of a strong dollar has not been realized.
While it would be nice if we had more emotion driving this market, the action is unquestionably positive and it would be downright foolish to anticipate a sudden collapse. Sticking with the trend may not seem very clever, but it is what works.
Have a good evening. I'll see you tomorrow.
April 23, 2015 | 1:19 PM EDT
Money Goes to Work
- · Buyers are continually being sucked into this market.
The current action is a good example of how buyers are continually sucked into this market. There was no great euphoria this morning as some pundits proclaimed earnings season a disappointment so far; however, the market held and as it moved into positive territory the buyers were afraid of being left out and started putting money to work. The intraday uptrend gained traction and that sucked in hesitant and underinvested bulls. Of course, the bears had little choice but to cover their shorts again but they console themselves by saying they are just a little early.
The Nasdaq has now taken out its all-time closing high of 4963, but it is still working on the intraday high of 5132 reached on March 14, 2000. It may not be technically significant after 15 years but it is psychologically important and reinforces the feeling that the market is quite healthy.
Another interesting fact is that the last time the S&P 500 and Nasdaq both closed at all-time highs was Dec. 31, 1999. The mood is nothing like it was back then, but you can argue that that is a good thing and suggests that there is still plenty of buying power out there.
Often in this market the biggest issue is finding places to put cash to work. The action doesn't create great technical setups and many of the movers -- especially the "junk" names -- are extended so you have to be willing to be aggressive with buy points if you want in. Some bulls scoff at quaint notions like "good" entry points, but it still is something that the old-timers think about and causes them problems when the market acts this way.
As the saying goes, "the trend is your friend" and there doesn't seem to be much question about which way things are trending.
April 23, 2015 | 10:33 AM EDT
Looking for New Buys
- It's a pure day trading if you chase the small-caps.
The action this morning is a good illustration of many of the themes that have persisted for a while -- strong underlying support and aggressive dip buying. The initial selloff on a mediocre earnings report from Facebook (FB) was bought and strong movers Arris (ARRS) and Skechers (SKX) are being chased.
These patterns of action have been evident for some time. The one thing they have in common is that they crush the bears. The minor weakness that encourages the pessimists disappears in a blink of an eye, and then the forced buying by underinvested bulls keeps the market running.
Upside momentum is still a bit slow but breadth is running 2,800 gainers to 2,350 decliners, and a bounce in has oil helped matters. Chipmakers and biotechs are laggards, and that is keeping the momentum in check, but there are enough strong earnings reports to keep the overall tone positive.
I exited my small position in Facebook (FB) this morning into strength and I'm looking for new buys. I'm holding Apple (AAPL), St. Jude Medical (STJ), Mobileye (MBLY) and a few others, but I continue to find it difficult to do anything sizable. There still is quite a bit of speculative action in "junk" names but it is pure day trading if you are chasing small-caps like Sysorex Global (SYRX) or ChinaCache International (CCIH).
April 23, 2015 | 7:29 AM EDT
Simply Accept the Market
- Speculative interest remains high right now.
"Life is a preparation for the future; and the best preparation for the future is to live as if there were none."
-- Albert Einstein
The market can't make up its mind lately. It bounces back from a poor day like it did on Monday, struggles again, and then has a generally positive day like it did on Wednesday. It isn't great action but there are enough positives to keep the bears off balance. On the other hand, there isn't enough strength to break things out and really trigger some upside momentum.
This morning it looks like more of the same. Europe is still struggling with the endless Greece issue and had some weak economic news as well. Economic news in Asia was also a little soft, but that is a positive as it suggest that more central banker stimulus will soon be unleashed.
In the U.S., earnings news was mixed. Qualcomm (QCOM) and Facebook (FB) were slightly disappointing but Ebay (EBAY) and Skechers (SKX) were well received. Overall, earnings have been a little drab but they haven't been poor enough to cause any real problems. We have Amazon (AMZN) and Google (GOOGL) tonight, which should keep traders busy.
The current market environment is a good example of why I often suggest a reactive rather than anticipatory approach to the market. It is very easy to formulate a grand bearish or bullish thesis right now, as there are plenty of arguments in either direction. Some will be right, and they can proclaim their great insight down the road, but it simply is a coin toss. The market is not giving us any clear signs of direction. The bulls see lots of positives, and the bears have no problem finding negatives.
Trying to navigate this sort of market action when you have a strong existing market bias can be extremely difficult. Nothing can be more frustrating for a trader than to formulate a thesis and then have the market action completely ignore it.
Probably the biggest obstacle for many traders over the past five years is that they simply never allowed themselves to embrace the market uptrend. They keep thinking that disaster is right around the corner and they stay cautious, even when the price action is quite positive. Anticipation of a market disaster has been a huge handicap, and has lost more money than any pullback in over five years.
Rather than anticipating the worst, it can be far more profitable to simply accept the market as it is right now and then react as conditions change. It still may be quite challenging to put money to work and to be a raging bull, but anticipating the future is extremely hard in ordinary circumstances, and is even harder when we have a choppy trading range like we have now.
We have some slight early weakness, mixed earnings and mixed results overseas, but the tone of trading was positive yesterday and speculative interest remains high.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider SYRX and CCIH to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.