Our old buddy, the V-shaped move, made a return appearance today. He hasn't been around much this year, but he tends to show up when the bulls are caught holding too much cash and are anxious to put it to work. After the wild swings on the Greece drama, many market players were not well positioned for upside, and that is the sort of thing that supports V-shaped action.
It was a slow but steady grind higher all day. We didn't have any dips at all. Breadth inched up nicely and was around 2-to-1 positive on the NYSE at the close. Amazon (AMZN) and Ambarella (AMBA) led the momentum names, but there were plenty of other movers.
One thing to keep in mind at V-shaped moves is that overhead resistance is mostly ignored, overbought conditions are irrelevant and light volume doesn't matter. These moves create "wall of worry" action that forces cash on the sidelines to be reluctantly deployed out of fear of being left behind. The big fear is that the market may not come back down and allow for entries.
We still have potential for overseas news to cause some volatility, but with earnings season starting in earnest tomorrow and some pretty good price action today, the bulls have the ball and are running with it. The V-shaped move is feeling frisky and it hasn't paid to underestimate him.
Have a good evening. I'll see you tomorrow.
July 14, 2015 | 1:46 PM EDT
Looking for New Buys
- ·Still a challenge to put money to work, but big-picture worries are now reduced.
Flat intraday action has been a characteristic of the market for much of 2015. The big moves come overnight and then the action drifts the rest of the day.
It is flat again today, but there's a positive bias and a slow uptrend. Breadth is solid and biotechnology in particularly is attracting momentum money. While it isn't very energetic, it is V-type action. We haven't seen much of that this year. In fact this will be the first time since mid-January that the S&P 500 has been up for than three straight days. The last strong V-shaped move came last October and November. Since then it has been choppier action, which actually feels more natural than some of the one-way moves we saw last year.
There aren't many flaws in this price action. The bears will argue that the market is a bit overbought after the recent move, but the momentum looks strong enough to continue. There are worries that Greece could unravel again, but that is mostly wishful thinking by the bears.
More earnings are coming and that is going to set the tone. Tomorrow night brings Intel (INTC) and Netflix (NFLX), the first of the key reports that will give us clues to overall market sentiment.
I continue to look for new buys and may add a few things into the close. It is still a challenge to put money to work, but if you can find setups you like, the big picture worries are now reduced.
July 14, 2015 | 10:24 AM EDT
A Good-Looking Market to Trade
- The focus has shifted away from the macro and back to stock picking.
With the Greek situation calming down and emotions no longer as intense, the action is mild this morning. The markets have improved slowly from the open and there is a positive bias, but breadth is running just 2,850 gainers to 2,250 losers and momentum is muted. There are pockets of action in Amazon (AMZN), GoPro (GPRO), Ambarella (AMBA) and Google (GOOGL), which is a good sign, but it is sedate.
After the gains over the last few days, this is exactly the sort of action we need. The pundits are talking about the possibility of the S&P 500 having its first four-day winning streak since January, but it really doesn't matter much as long as yesterday's gains aren't given back. There is significant overhead resistance to work through, and that should take effort. But the S&P500 is back over the 50-day simple moving average and that is a positive.
There is good action in biotechnology and solar energy, which are key momentum groups. That is a sign of speculative health. Oil is also coming back after selling off on the Iran negotiations, and semiconductors are looking much better.
Guidance Software (GUID), which I've mentioned, is breaking out nicely and I'm looking to rebuild Synergy Pharmaceuticals (SGYP) as it acts better. Mobileye (MBLY) continues to move along and Facebook (FB), my Stock of the Week, is stable as it works through flippers.
Overall, it is good-looking market to trade right now. It is just a matter of digging for good picks. It is still narrow, but the focus has shifted away from the macro and back to stock picking.
July 14, 2015 | 7:03 AM EDT
You Can Be More Bullish Now
- Uncertainty has declined just in time for earnings season.
"The greatest beauty always lies in the greatest clarity."
--Gotthold Ephraim Lessing
Although the deal still has some major hurdles, market players are relieved to finally look beyond the constant Greece headlines. There are still plenty of macro issues that will produce market moving headlines, but with the earnings season starting in earnest today, we can focus more on stock picking once again.
The big challenge of the market in recent weeks has been the randomness caused by the news out of Europe. We have had numerous gaps and it has been nearly impossible to place much confidence in the charts. Stocks have moved in tandem on the news flow, and that has rendered individual stock picking nearly impossible.
A deal with Greece, a bounce in China and two good days for the market as we head into earnings season has market players feeling much more optimistic. The nuclear deal with Iran is the big headline this morning and is causing some additional pressure on oil, but it isn't a big market mover. A proposed takeover of Micron (MU) is also in the news and may help the struggling semiconductor sector today.
The big issue we face now is whether the market can gain further momentum and maybe even produce some of that V-shaped action again. The choppiness of the last couple weeks has created an increased supply of underinvested bulls, which is the main ingredient of chasing action that results in V-ish moves, but the mood of the market has shifted recently and those Vs aren't showing up like they used to. It was the central banks that really made them possible, and with the talk about rate hikes taking hold, there just isn't the same juice there that there once was.
We have some banks reporting earnings today and then Intel (INTC) and Netflix (NFLX) on Wednesday night and Action Alerts Plus charity portfolio holding Google (GOOGL) on Thursday. Because of the focus on macro events, expectations for earnings aren't very high. Another good thing is that earnings season puts the focus back on individual stocks, and that is a positive for traders that like to focus on individual names and good chart patterns.
Overseas markets are backing and filling after some good gains, and our early indications are flat, but we are likely to see some good support as underinvested bulls, who didn't chase the bounce, look for entry points.
Technically the S&P500 still has work to do. It is under the 50-day simple moving average and has some overhead resistance to deal with. We are not in a full-fledged uptrend but we are regaining our footing and the potential for further technical improvement is building.
My game plan is to stay very focused on individual stock picking and to try to put more cash to work. Things like Facebook (FB), my Stock of the Week, are acting well and there is clearly an appetite for high beta, big caps like Amazon (AMZN) ¿ which is a holding of the Growth Seeker portfolio -- and Netflix.
The big news right now is that uncertainty has declined and market players are trying to put cash to work. You can still worry about the headlines, but the conditions support a more aggressive bullish approach.