The dip buyers were so anxious to buy the "Turkey Contagion" headlines that appeared overnight that they had the indices back in green before the open. The DJIA was indicated down around 120 points or so overnight but is now up around 40 points. As I commented in my opening post: this market simply does not panic.
Despite the green indices, breadth is running negative at around 3050 to 3470, and there are over 185 new 12-month highs to just 70 new lows but there definitely is not any panic out there. Buyers are not inclined to chase after the initial bounce trade and that leaves the action a little lethargic. It is primarily the FAANGs that are driving the strength.
My Stock of the Week, Square (SQ) , is a good example of the pockets of positive momentum that still exist. Also, Amazon (AMZN) is leading the FAANG names higher and there are a fair number of small caps with some decent charts.
One group that is having issues again is financials. The Financial Select Sector SPDR ETF (XLF) dropped over 1% on Friday and is struggling again today.
Deutsche Bank (DB) is a good example of the pressure that banks are under. DB dropped nearly 5% on Friday and is down an additional 2.7% Monday. The stock was downgraded to "Underperform" from "Neutral" by Bank of America/Merrill Lynch this morning due to "continued commercial international bank headwinds." Last week Morgan Stanley also cut DB to "Underperform."
Deutsche has managed a good bounce after hitting a low in late June due primary to cost cutting, but its murky prospects combined with issues like the implosion of the Turkey Lira is going to prevent value buyers from rushing in.
Deutsche exemplifies the old adage about not trying to catch a falling knife. This stock is under severe pressure and the downside momentum is substantial. Now is not the time for entry.