For much of 2015, one of the problems with the market is that we aren't seeing aggressive upside momentum. We generally have good support and the dip buyers are active like they were this morning, but we haven't put together the V-shaped moves that characterized this market for so long.
Another issue is that the indices have done a poor job of reflecting the action in the average stock. The indices have held up much better than most stocks. This is easily seen with the T2108 indicator on TCNet. That indicator shows that only about 27% of stocks are trading above their 40-day moving average of price. This is the same level that we hit in December 2014 when the indices were quite a bit lower. While many stocks have lost moving-average support, the indices have shown relative strength.
This sort of non-confirmation tends to hurt sentiment as more people are likely to underperform. Stock picking has been much more difficult lately and the indices simply don't reflect the real issues out there.
One other characteristic of this market that creates frustration is that we don't see the sort of emotional extremes that produce good turning points. There tend to be high levels of complacency both when we are hitting new highs and when we are breaking down.
We have no euphoria at highs. In fact, the rallies are often called joyless. On the other hand, we don't have any real panic when we have dramatic events like Greece. Despite the media hysteria, the market shrugs. That makes the bulls feel better, but it prevents a real cleanout that would give us better market conditions.
Overall, we are left with a market that keeps many folks waiting. They may nibble at some dips, but they aren't loading up and aren't inclined to chase. There isn't much fear, but there isn't much optimism either.
The key is to try to find some individual stocks that may be acting OK, like Mobileye (MBLY), Facebook (FB), Synergy Pharmaceuticals (SGYP) and Synthesis Energy (SYMX) and to make sure you manage things tightly. (Mobileye is part of TheStreet's Growth Seekers portfolio. Facebook is part of the Action Alerts PLUS portfolio.)
We need a good close today to help suck in more buyers. Right now, they aren't feeling any rush to jump back in.
I'm off to the big city to have some programming done on my cochlear implant and may not make it back for the finish. I see no reason to be doing much buying into the close.
July 6, 2015 | 10:32 AM EDT
Bounces Lacking Energy
- · Interest in chasing is low, but there is still a good supply of dip buyers.
Market players are well conditioned to buy any and all weakness. They bounced futures off the early lows overnight and are pushing us up from the gap down open this morning. We have consistently had pretty good support but aren't making any good upside progress as we go dead intraday after the initial buying. Once the European markets close, there doesn't seem to be any appetite for stocks.
Last Monday, there was very similar action in the early going. The problem was that the bounce quickly lost momentum and we starting making new intraday lows, which triggered stops and more selling pressure. The folks that are buying the dips this morning are not long-term investors. They are flippers and are not going to stick around very long if the early lows are retested.
Overall, the mood seems rather complacent despite the urging of many of the television pundits that seem to be rooting for more drama. They don't want to see a good crisis go to waste and right now the market isn't showing enough of an emotional response to produce real excitement.
Despite the lackluster action, a few things I've discussed lately are acting well. Mobileye (MBLY) is breaking to new highs and Second Sight Medical Products (EYES) is up on a recommendation and a price target of $21. I still like what Synergy Pharmaceuticals (SGYP) is developing, but overall there isn't much to do at the moment.
The potential for the market to roll over and test early lows is quite high, although there is still a good supply of dip buyers out there to prevent major downside momentum. Unfortunately, no one is very interested in chasing right now so the bounces aren't producing a lot of upside. The news flow will keep us dancing around but at this point it doesn't look very bad.
JUL. 06, 2015 | 6:37 AM EDT
Keep an Eye on Intraday Lows
- If they start to fall, more drastic action is needed.
"Chaotic action is preferable to orderly inaction."
Markets were surprised by the margin of victory for the "no" vote in Greece but futures have already bounced substantially off the lows. Market players are relieved that the situation is finally coming to a crescendo after dragging out for five tedious years. There is still a substantial amount of uncertainty, as it is still unknown whether Greece will maintain the euro as its currency, but there isn't any panic out there.
Market players have not done a very good job recently of anticipating the events in Greece. They were surprised last weekend when no last-minute deal was made and an actual default on the IMF debt occurred. They were surprised again this weekend, when the vote wasn't even very close. Nonetheless they are tired of having to dance around to the constant headlines and are looking for an opportunity to move forward and focus on other matters.
There are plenty of other matters out there too. We have some wild action in China, where the government is doing everything it can to prop up the market. They are ramping up liquidity, cancelling IPOs and making it very clear they want buyers to support the market.
The Greek situation is helping to shift some of the focus away from interest rates and the jobs report on Thursday also helped to push back projections for rate hikes. At the moment it doesn't appear that the Fed will be making any adjustments until next year.
Let's not forget that second-quarter earnings start to roll in with Alcoa (AA) providing the kickoff on Wednesday afternoon. There is still another 10 days before the key reports start to roll in, but we should start to see expectations solidify this week.
In the short term, there is going to be a tremendous amount of uncertainty over Greece. There were many sensationalistic comments overnight, but the overall market reaction so far is fairly mild. The bullish spin is that most of this is already priced in, but the market has done such a poor job in anticipating Greece lately that you have to wonder if it is going to be surprised again as events continue to unfold.
The big question for us to ponder is how best to navigate this. The action over the last week should have triggered some stops and caused some defensiveness, but the chances of being caught on the wrong side of a trade are still very high. There has been some interest in trying to bottom fish but this morning we'll see some retests of recent lows and then it will be up to the buyers to show us that they can hold support.
Technically, the overall picture is not very healthy. The selloff last Monday set the stage for a limited oversold bounce and we are giving back a big chunk of that this morning. So far we are still trading above last week's lows. That is going to be the key. The SPDR S&P 500 ETF Trust (SPY) found support at the 200-day simple moving average but if that is retested it is going to cause some nervousness.
Last Monday the surprise news from Greece led to much more dramatic selling and then a bounce that didn't hold and resulted in a close at the lows. A close at the lows today would be a major negative as it would show how confused this market still is over the Greek situation.
Typically selling into an open like this has not been a smart move, but keep a close watch on intraday lows. If they start to fall, more aggressive defensive action will be required. The key is to protect capital and to be in position to take advantage once things clarify and opportunities develop.