The indices finished in the red and closed near the lows, but given the ammunition that the bears had it could have been much worse. The mighty Apple (AAPL) disappointed and Microsoft (MSFT) didn't help matters, but traders were still active in some of the bigger-cap names like Chipotle (CMG), Baidu (BIDU), Ambarella (AMBA) and Eagle Pharmaceuticals (EGRX).
Although it was narrow, there were pockets of momentum, but there were also some pockets of disaster that weren't that narrow. The list of stocks hitting new lows continued to grow, but it has mainly been commodity-related names, especially oil. There was chatter about a major blow-up of an MLP fund and that added to the pressure on oil and gas.
We have some select big-cap technology names doing well on the upside and quite a few oil and mining stocks leading to the downside. That leaves the great bulk of stocks in the middle, and for the most part they are not doing much. There are some restaurant and retails doing OK on lower gas prices and most of the best setups I see are still biotechnology names, but finding setups is a tough job. There are about 200 stocks making new highs, which may appeal to the momentum chasers, but you better be selective or you will be jerked around.
Overall, it is a very well-mixed market. The bulls have some positives to point at, but the bears have plenty of ammunition. The good news is that the bears remain inept and haven't really been able to press when they have had a chance. They have done well killing commodity names, but they aren't doing so well trying to kill AAPL and some of the other technology names.
Whether this is a good market or a bad market really depends on what you are looking at. The indices aren't bad at all, but some of the underlying action is poor. The best thing you can do is stay flexible and be ready to adjust as conditions change.
Have a good evening. I'll see you tomorrow.
July 22, 2015 | 12:52 PM EDT
You're Missing Your Chance, Bears
- · There's not much market movement right now.
The market has had a couple of consistent themes over the last few months -- dip buying and flat intraday action. We are seeing both again today.
The somewhat surprising weak report from Apple (AAPL) and the resulting gap-down open were an invitation for the dip buyers to do their thing. They did a nice job of moving us off the lows, and the small-cap indices have even managed to move into positive territory. Breadth is still negative and the S&P 500 is struggling to hold the intraday lows, but things have gone dead and we aren't seeing much movement right now.
One of the biggest positives we have is that the bears never seem to do much when they have an advantage. They had some mediocre earnings from Microsoft (MSFT), Yahoo! (YHOO) and AAPL to work with, but the dip buyers are happy to jump in as the selling picks up a little. There may not be much upside momentum right now, but there is even less downside momentum.
The sort of action that we have today tends to draw in folks who have been cautious and have some idle cash. There is enough positive movement to stir up worries about being left out and underperforming. Defense has so seldom paid off in this market that it is tough to be aggressive with it, especially when you see so many stocks bounce off opening lows.
I'm definitely in the camp of needing to put more money to work, but it is a challenge. The S&P 500 ETF (SPY) is testing intraday lows and that is a bit of a worry, but small-caps are exhibiting some relative strength and that is providing a dose of hope.
July 22, 2015 | 11:30 AM EDT
Thanks Goodness for the Dip Buyers
- ·Market's doing a good job of ignoring Apple earnings.
Dip buyers are busy this morning as they take advantage of the negative reaction to Apple's (AAPL) earnings. Market players love to love AAPL and it has seen steady underlying support since the open. It is an easy place for funds to park cash and many managers are happy to reduce their basis in the stock when they have a chance. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
Breadth has been improving steadily since the open and is now running about 2300 gainers to 2700 decliners. Homebuilders, retailers and banks are leading while biotechnology, chips and gold are the laggards. There are some inventory numbers coming up for oil that will move that group.
Dip buyers have been the salvation of this market for a very long time and they are doing a good job once again. We still have some overhang because of the disappointment caused by AAPL, but Chipotle (CMG) and Intuitive Surgical (ISRG) are acting like rampaging momentum stocks once again.
Things are steadily improving and that is sucking in some bulls with idle cash. It is still quite challenging if you are seeking good chart setups, but bottom-fishing is working fairly well. I haven't made any new buys so far today, but if we hold up I'll be deploying some cash this afternoon.
The market is doing a good job of ignoring AAPL's mediocre earnings report.
July 22, 2015 | 7:01 AM EDT
The Market's Lost Its Big-Cap Tech Cover
- · The average stock in this market is not very healthy.
Three things cannot be long hidden: the sun, the moon, and the truth. -- Buddha
After strong earnings reports from Google (GOOGL) and Netflix (NFLX) helped to propel a V-shaped bounce in the indices, expectations for a robust earnings season were high. But last night's reports have upset the developing momentum.
Apple (AAPL), which is probably the most important stock in the market, had huge earnings in China, but didn't quite reach its revenue targets and provided slightly disappointing guidance. Microsoft (MSFT) and Yahoo! (YHOO) disappointed as well, but Chipotle (CMG) and GoPro (GPRO) shrugged off some knee-jerk selling and are not trading in positive territory.
The market has been generally inclined to recover quickly from earnings concerns and it is already off the lows from last night, but there has been some worrisome action under the surface. Big-cap names like GOOGL, Amazon (AMZN) and NFLX have kept the indices in the green until yesterday, but under the surface it has been a much more mixed picture. The average stock has not been acting particularly well. Breadth has been poor and the stocks making new 12-month lows have been piling up.
Part of the weakness has been due to pressure on commodity-related stocks that have been punished by oversupply, weak demand and a stronger dollar. Oil and pressure metals are groping to find support, but have hurt the internal action of the market.
It isn't just the commodity names that have been an issue. The average stock in the market is trading below its 200-day simple moving average. About 60% of the market is well off its highs and it is not at all reflected in the major indices, which are still within a stone's throw of all-time highs.
The challenge of the market recently has been its narrowness and that has been complicated by the fact that the big-cap technology names have made the indices look quite positive. The problem is that if you aren't in the small group of names that have been gunned, you don't have many other choices and, even worse, there have been some sudden reversals in leaders like Tesla (TSLA).
So, the big issue now is whether these earnings reports kill the big-cap technology leadership and push the indices to better reflect the weakness that has already existed. The indices have been very misleading, but with heavyweight AAPL under pressure today and IBM (IBM) getting hit yesterday there is no longer a cover-up.
Overall, the indices are still trending higher and are technically healthy, but this is not an easy market to navigate. It is necessary to be highly selective with stock picks and the potential for surprises as earnings season continues is quite high.
In the early going, the market is working to regain its footing and there are signs of dip buying, but with the mighty AAPL seeing some downgrades and some good recent profits to protect in big-cap technology it is going to be tricky.
One problem for traders now is that we don't have any good themes.
Biotechnology has been losing steam and the big-cap technology names are much more problematic at this point. They never did provide good leadership, but even that is diminished now.
My approach here is not be overly negative, but to make sure I manage any new buys quite carefully if I can find some.
The indices may still look OK and we have some signs of underlying support, but the average stock in this market is not in very good shape.