The market looks tired Friday after the strong move and pockets of momentum on Thursday. The speculation in cannabis stocks has slowed and only a few of the secondary names, such as David's Tea (DTEA) and India Globalization Capital (IGC) , have been in positive territory.
Breadth is positive with around 4,000 gainers to 2,600 decliners but there are not many big percentage movers today. I suspect that some market players are standing aside in front of the major rebalancing that is taking place after the close Friday. There will very likely to be some odd action due to this and it isn't possible to game it.
I've not been doing much but I did add a small position in Strata Skin Sciences (SSKN) , which has a system to assist in the detection of melanoma.
The S&P 500 is hitting intraday lows as I write and more market players are moving to the sidelines as they protect recent gains.
Micron Under the Microscope
When a stock has just posted operating EPS growth of 75% and trades with a trailing P/E of just 4 it seems indisputable that it is a great value. Those are the numbers that Micron Technology (MU) is boasting after its latest earnings report but there is one big problem. Historically, Micron has been highly cyclical and when it looks the cheapest it is often at the top of the current cycle. That is what is weighing on Micron Friday.
The debate over whether Micron is a good value here is very intense (read Jim Cramer's view of Micron here), but the price action indicates that there are some substantial doubts. The stock has been under pressure since topping in May around $64 and has consistently sold off on any good news since then.
What is giving the bears some ammunition Friday is that the Micron guidance was a bit below consensus expectations. The bigger problem is that there are concerns about the growth in the broader chip sector. There is no clear turn down in the VanEck Vectors Semiconductor ETF (SMH) at this point but it hasn't made a new high since March and the low P/E is a clear signal that there is major concern about a cycle turn.
Even if you do believe that Micron is cheap, the chart is not very attractive at this point (read Bruce Kamich's analysis of MU here). There have been a handful of bounces since the May top and each has been sold. The stock is having a very hard time making higher highs that are necessary for an uptrend to resume.
If you are a value buyer, then there may be a basis for arguing the market is too pessimistic about a cycle turn in chips. If you are a technical buyer, however, there is little appeal to the Micron chart at this point.
