In recent weeks the market's biggest problem has been a lack of sustained momentum. There will be a good day of action and then the strong stocks will fizzle the next day. Usually there is rotation into some new groups or a key big cap that keeps the indices up but the choppiness in individual stocks has made trading challenging.
As I discussed yesterday, big cap, high beta names regained a leadership role yesterday. Apple (AAPL) received most of the attention but stocks like Square (SQ) and Paycom Software (PAYC) attracted some momentum money. Today those stocks are stumbling and the only FAANG name in the green is Facebook (FB) .
Small caps are lagging today which is part of the inconsistency of the market action lately. Breadth is positive, but we still have a low level of stocks hitting new highs.
There isn't any particular news to account for this choppy tendency of the market. The jobs news this morning was not as robust as expected but that may actually be a positive as it keeps Fed hawkishness contained. A rate hike is coming in September, but the market will worry if prospects for future hikes starts increasing quickly.
Job growth is strong, there aren't any strong inflationary pressures and earning season has been generally good. If there is any good news on trade the potential for more market upside is strong.
I've been doing a little flipping this morning but added to a position in Global Blood (GBT) and am averaging into a small cap Amyris (AMRS) which has an interesting niche in providing ingredients for cosmetics that are plant based rather than animal based. There is a good-looking cup-and-handle pattern there, but it trades very thin.
Real Money's Stock of the Day is Heineken (HEINY) . The stock is trading up this morning as the company has signed a non-binding agreement with two Chinese companies to create a long-term strategic partnership for Mainland China, Hong Kong and Macau.
That news is providing some bounce after a poor reaction to the second quarter earnings report. The company posted 11% EPS growth and 6% revenue growth, but the stock was downgrade by Jefferies to hold from buy.
One big problem facing the beer industry is that the millennium generation seems to prefer other forms of liquor over beer. There has been a steadily decline in US beer consumption recently and one problem that Jefferies highlights for Heineken is its geographic mix.
Technically, the HEINY chart is not very attractive right now as it has the big gap down following the earnings news to fill. Until that happens downward pressure would remain.
Overall action on my screens is deteriorating as I write this and I'm increasingly concerned that we may see momentum fizzle out once again. There wasn't any good news to account for yesterday's strength and there isn't any bad news to cause weakness today but the market seems to prefer this seesaw action rather than a sustained trend.