Although the indices have been performing well recently, much of the market has been stumbling around and doing little. There has been a lack of momentum in general but sector rotation and some good responses to earnings have helped the indices to stay near the highs.
The bears have been intently focused on the trade issue as a potential catalyst for a sell-off and interest rates have been fodder for the pessimists as well, but the market is numb to those arguments. Today a meltdown in the Turkish lira finally gave the market a good excuse for some real selling.
As is typical with a breakdown in an 'emerging market' country, the fear is contagion. If the Turkish lira becomes worthless then the debt denominated that currency becomes worthless and that will cascade through the balance sheets of Turkey's trading partners and could impact a number of other countries in the region.
With the indices technically extended and so much lackluster trading taking place this potential for a Turkish contagion is a good excuse for a much needed sell-off. This downside action is actually quite healthy in many ways as it allows the market to washout some of its complacency and allow some new leadership stocks to develop.
One stock that is not developing as a leader today is Dropbox (DBX) . The stock spiked up in anticipation of its earnings report last night which was quite positive but gapped right back down this morning following news that its COO will be leaving the company.
Managerial changes always worry the market because it tends to believe that it is a sign of some operational issue but in cases like Dropbox the news is likely to be overlooked quite quickly. There is no shortage of managerial talent in the company and there doesn't appear to be any major operational issue that the company is grappling with.
There has been some inclination lately toward a 'sell the news' reaction when there isn't a major earnings blowout, and in the case of Dropbox that was likely hastened by the fact that the shares locked up for the IPO will began to trade in a couple weeks. There is a good number of shares that were locked up and there is concern the supply will keep the stock contained.
Overall Dropbox numbers looks good but its post IPO performance isn't anything exceptional. It has a great niche and will likely be a good buy down the road once lockup shares are digested and the managerial issue is forgotten.
While Dropbox isn't doing well today, I do like the action in Square (SQ) . I've added to my position there and will be adding further.