The indices were fairly flat intraday, but it was another solid day for the bulls. We've had very tight intraday ranges lately, but there is still a positive bias and we've tended to close well. When you combine that with the strong overnight action, we have another classic V-shaped move.
One of the hallmarks of V-shaped moves is that they are slow but extremely steady. Volume is usually light and we don't see classic chart setups, but the fear of being left out keeps driving things higher.
A big positive right now is that big-cap momentum names have been heating up. Netflix (NFLX) was chased all day and closed well. Google (GOOGL) has gone straight up all week and now is being chased even higher on a very good report. The stock is trading in all-time-high territory on the news and is dragging up some other names such as Facebook (FB) and Amazon (AMZN). (Google and Facebook are part of TheStreet's Action Alerts PLUS portfolio. Amazon is part of the Growth Seeker portfolio.)
A lot of folks thought this sort of V-shaped momentum action was unlikely to occur again. The central bankers are more hawkish and China and Greece have added some uncertainty. What folks are forgetting is the chronic underperformance that has plagued fund managers for so long. This sort of action forces them to hold their noses and buy. They may have some doubts about the market, but they have no choice but to throw money at it if they want to perform.
So far, earnings season is looking very good. NFLX and GOOGL have the hot-money boys chasing high-beta big-caps and the indices are shooting for new highs. Looking at that GOOGL chart, you might think it was ripe for some "sell the news" action, but that isn't a phenomenon that occurs very often these days.
Have a good evening. I'll see you tomorrow.
July 16, 2015 | 1:50 PM EDT
Nighttime Is the Right Time for Market
- ·Meanwhile, intraday is pretty much dead.
The biggest challenge of this market recently is trying to find an edge intraday. As has been the tendency for a while, most of the movement is occurring overnight, but recently we have gone completely dead intraday. At the moment, the S&P 500 ETF (SPY) is trading at the exact point at which it opened, but what makes it worse is that the intraday range is so narrow.
While that action makes things pretty slow for traders who are hungry for action, the overall picture is still quite positive. The indices are up four of five days and the Nasdaq, in particular, is within a stone's throw of all-time highs. It's the same sort of V-shaped action that has occurred so often the last few years but hasn't occurred since last January.
Bored traders are sometimes tempted to look at the short side since they are having a tough time finding new longs. That approach has been quite dangerous in this market where these very slow, low-volume moves can keep going. If you want to play the dark side, wait for some weakness rather than try to guess when we top out. We may be a bit extended right now, but overhead resistance isn't usually a big issue when we have movement like this.
Breadth is solid at 2-to-1 positive and we have over 300 new highs. It is business as usual for the bulls. It may be dead-flat intraday, but it is very positive action in the bigger scheme of things.
July 16, 2015 | 10:18 AM EDT
Don't Force This Action
- · Strength is broad but momentum is limited.
The positive news flow has produced very good breadth at nearly 4-to-1 positive, but the point gain in the indices is contained. There is broad strength but limited momentum so far. Biotechnology, solar energy and oil are leading while chips and precious metals are lagging.
Intel (INTC) is unable to attract sustained buying and that is weighing on technology names. On the other hand, Netflix (NFLX) is keeping the momentum going in other high-beta, big-cap names.
A number of stocks I've discussed lately, including Facebook (FB), Guidance Software (GUID) and Mobileye (MBLY), are still acting well but it is a challenge to put cash to work. I'm a buyer, but I'm surprised that there aren't more setups. Quite a few stocks are off recent lows and holding up, but further upside is becoming challenging.
One of the difficulties of the market lately has been the extremely flat intraday action. The big moves are coming overnight and if you don't catch them, you don't have much intraday volatility to play. My game plan is to keep going through the charts but not force things if I don't find what I like.
July 16, 2015 | 7:24 AM EDT
Embrace the V-Shape
- There are still underinvested bulls on the sidelines.
"Whatever the present moment contains, embrace it as if you had chosen it."
The market's recent V-shaped bounce paused briefly yesterday, but it's back on track this morning as Greece passed austerity measures and Intel (INTC) and Netflix (NFLX) reported solid earnings. Some nervousness over Greece and Janet Yellen's hawkish tone provided an excuse for some consolidation after a strong four-day move, but the pullback was very mild and the bullish technical conditions remained intact.
We aren't finished with Greece yet, as more votes and approvals are needed, but the market seems satisfied that the worst is over and is no longer intently focused on the news flow. China markets held up well after a brief pullback the night before, and the earnings season is off to a very good start.
Both Intel and Netflix surprised with strong reports. Expectations have not been very high, so this may be a theme to watch this quarter. We have Action Alerts Plus charity portfolio holding Google (GOOGL) reporting tonight which will be another good test for the level of expectations.
The big issue now is whether the market can gain sufficient momentum to keep this V-shaped move going. The pause yesterday was likely helpful in that regard, as it helped to temper overbought technical conditions and allowed for some minor consolidation. It is always good to see a little additional uncertainty as the market up-trends, as it assures that there still is buying power on the sidelines to provide support.
After several weeks of uncertainty, the clouds are clearing and market players are feeling much more confident about Greece and China. Janet Yellen continues to tease us about the potential of interest rate hikes, but the market seems unconcerned about the prospect of a quarter point hike or two. Many economic pundits still think it is unlikely that a rate hike will occur in 2015.
Not only is the news flow providing greater clarity, but technical conditions are improving. We've had some very good leadership from the biotechnology sector, oil has been bouncing as it shrugs off the Iran deal and momentum stocks have seen better action lately with names like Growth Seeker portfolio holding Amazon.com (AMZN), Facebook (FB) and Google leading lately.
The recent market action triggered plenty of stops, and there is a good supply of underinvested bulls trying to deploy capital once again. They are the main ingredient in V-shaped moves and they will be feeling anxious once again with the "Greece is saved" spike this morning. Finding entries and putting cash to work is the main theme right now and that bodes well for trading.
I don't want to sound too bullish as we still have headline risks and Janet Yellen can always shake things up with the wrong comment when she is in front of the Senate today, but this action is looking like some of our other recent V-shaped moves, and the best thing we can do is embrace it and look for some buys.