The pattern of action we are seeing this morning is nothing new but it is even more extreme than usual. The indices gapped down on worries about a trade war with China but the news was nothing new or surprising. After the opening low the indices proceeded to trade straight up. There has hardly been a downtick in the S&P 500 5-minute chart. The DJIA and S&P 500 are still red but the Nasdaq and small caps are green. Breadth is negative and there are more new 12-month lows than highs.
This has been the general character of the market for a couple weeks now. It refuses to sell off on bad news but doesn't gain enough momentum to produce a good uptrend. Also there is a high level of rotation and leadership is limited. Today, the earnings leaders are Square (SQ) and Tesla (TSLA) . Yesterday's big winner Paycom Software (PAYC) is gaining further momentum.
I have some good action on my screens in a number of names I've mentioned recently such as Turtle Beach (HEAR) , Bloom Energy (BE) , W&T Offshore (WTI) , Solaris Oilfield (SOI) and Intelsat (I) . I still have a very large cash position but this sort of action in individual stocks is what I want to see to put more money to work.
Action Alert PLUS Portfolio holding DowDuPont (DWDP) is suffering today from a 'sell the news' reaction to a good report. The company beat earnings and revenue estimates and raised Q3 guidance but is down about 2%. Market players simply are not willing to chase solid news like this right now. The company is impacted by trade war issues and currency fluctuations which is part of the reason that buyers are not stepping up.
Technically DWDP has some support in the $65 area and may warrant some slow accumulation but it needs to regain its 200-day simple moving average at around $69 before it will be of interest to momentum and technical buyers. The valuation looks attractive with a trailing PE of just 18 compared to EPS growth for the full year of 2018 of 23%, but market conditions just don't favor aggressive buying at this time.