The market has become increasingly volatile on an intraday basis over the past week or so. During the recent run-up, it was rare for the indices to reverse intraday but we have seen that occur every day this week, and today they changed direction four times. Unfortunately, most of the reverses have been to the downside and have resulted in poor closes. Today the indices finally managed to bounce a bit and close a little better, but it was lackluster.
The good news is that individual stocks continue to chug along and are not moving in a correlated matter. In other words, stock-picking is working and the indices have largely been irrelevant.
With the end of the quarter upon us, I was expecting a decent bounce, and I will be looking for more upside tomorrow. There looks to be window-dressing action already, especially in big-cap momentum names like Facebook (FB). With option pinning tomorrow, we should see choppy action to wrap up the month.
Overall, I'm sticking with long plays and I don't see any reason to be shorting. But next week could be a different story.
Have a good evening. I'll see you tomorrow.
Sept. 26, 2013 | 2:02 AM EDT
- The buyers are pushing again.
After a quick U-turn this morning, the buyers have jumped in and are pushing again. Breadth is well off the nearly 3-to-1 positive levels we saw earlier, but there is plenty of strength in momentum names and select small-caps.
The strength in Facebook (FB), Tesla (TSLA), Netflix (NFLX), LinkedIn (LNKD) and Amazon (AMZN) smacks of end-of-the-quarter window-dressing. Those stocks have been big winners this quarter and fund managers want to show them on the books and see them close as high as possible. Peak window-dressing occurs a day or two before the last day of the month as most fund managers don't want to be too blatant about the games they are playing.
I've been flipping out of some positions today as a matter of discipline. It bothers me a bit that we have had so many quick intraday reversals lately and that the market has tended to close poorly. We were due for a bounce today, but I'm not counting on this turning into another one of those V-shaped bounces.
There continues to be good action in individual stocks, but quick reversals and choppiness are making it a bit tougher.
Sept. 26, 2013 | 10:43 AM EDT
Talk of Window-Dressing
- The bulls are taking advantage of it.
There is talk about window-dressing with the good bounce to start the day. After five down days and the end of the quarter fast approaching, it was a good setup for the bulls, and they are taking advantage of it.
Breadth is healthy with 3,770 gainers to just 1,200 losers. There's leadership in biotechnology and retail. Solar energy, which I discussed yesterday, is hot again and I continue to hold positions in JinkoSolar (JKS), Trina Solar (TSL), JA Solar (JASO) and Yingli (YGE) in that group. The big-cap momentum names are chugging along, although I did cut back my Facebook (FB) position a bit as I think it will have problems hurdling $50.
I've been looking to put money to work this morning and added to positions in Century Casinos (CNTY) and BioTelemetry (BEAT). BEAT in particular is in an interesting story and after the takeover of MAKO Surgical (MAKO) yesterday, the medical equipment sector looks interesting. I'll be looking to add to my position above $10.50.
Overall, the market continues to act well. The indices have been deceptive and actually helped to create opportunities. We need to take advantage while we can.
Sept. 26, 2013 | 7:40 AM EDT
In Good Shape for a Bounce
- The indices mislead us about what is really going on.
Look beneath the surface; let not the several quality of a thing nor its worth escape thee. -- Marcus Aurelius
Despite five-straight days of losses for the Dow and S&P 500, the market remains quite healthy. The IWM, for example, is still just barely off its recent highs and is down just 0.58% over the last five days.
More importantly, the key leadership stocks continue to press higher with names like Facebook (FB), Tesla (TSLA), Netflix (NFLX) and Amazon.com (AMZN) steadily making new highs. If you just look at these stocks, you would have no clue that the market is under any pressure.
The bearish spin on things is the market is dealing with the political uncertainty in Washington and with a weakening economy as well. Back in December and January the market blasted higher for months after the debt ceiling issue was finally resolved. We definitely seem to be setting up for that to occur again. The politicians are going to continue to posture and point and make it sound like the world is coming to an end, but ultimately a deal will be done and we'll move on to the next crisis.
What concerns me more is that we are losing the Fed as a market driver. The market initially celebrated Ben Bernanke's decision to forego tapering, but we have completely given back those gains and the concern now is that bad economic news really is bad because the Fed, at most, will simply continue to do what it is already doing. There is not going to be any additional quantitative easing unless we have some very disastrous economic news.
Even though the macro picture is a bit of a mess, the action in individual stocks continues to be extremely positive. If you focus on the names that are being actively traded, you would have think the market is in great shape technically and, in fact, it isn't in too bad a shape. There are plenty of stocks acting quite well and there are few signs of any real meaningful correction taking place.
With the potential for some resolution of the debt ceiling issue soon, end-of-the-quarter window dressing and some oversold conditions, we are in good shape for a bounce to kick in. It doesn't hurt that there are still plenty of pressing bears and underinvested bulls. I like the setup for some upside in the next couple days and will continue my quest for more long positions.
We are in one of those market situations now where the indices mislead us about what is really going on. Five-straight down days sounds pretty bad, but under the surface it has been quite a good market. Stay focused on individual stocks and don't be fooled by the macro noise. This market is in good shape.