Big drops lead to big bounces. That is what we are seeing today. The indices are all up substantially with the technology driven Nasdaq 100 (QQQ) leading with a gain of 2.2%, while the small cap Russell 2000 is lagging with a gain of just 0.35%. Breadth is very strong with about five gainers for every two losers but since there has been so much selling pressure lately there are almost no new 12-month highs but 350 new 12-month lows.
So far this has been gap-and-sit action for most the market. The buyers are not building on the gap up open but that is caused by pressure form short-term traders that bought the last couple days and are flipping for some fast profits. There is also overhead created by trapped longs that are happy to get out with somewhat diminished losses and there are always bears looking to remount their short positions.
I've not done much new buying but I have taken some profits in place. Turtle Beach (HEAR) ,which I discussed yesterday, is up over $3.00 and I've taken some partial profits but will hold a core for a longer term swing trade. Also, Sarepta (SRPT) , which is one of the bargain biotechnology names I mentioned yesterday, is up sharply and I may take a little of that off the table.
There are some good traders working but one glaring problem today is banks. A number of banks reported okay numbers but they did not hold gains and are now in negative territory.
JPMorgan Chase (JPM) beat by eight cents and reported revenues roughly in line with expectation. It was a good report and the company sounded optimistic on its conference call but the issue is that there are worries about both loan growth and the yield curve. Management stated that it expects some slowing growth in a raising rates environment but doesn't see it as a major issue. They are also optimistic about the global environment.
The market obviously is not embracing JPM management's optimism. The stock had given up all its early gains and is now at the lowest point since July. This is a poor chart and the pressure on financials is hurting the whole market.
The good news is that the sharp drop in the indices and the big bounce have given us some technical levels to work with. I expect charts to develop over the next week into the bulk of earnings reports that starts in about 10 days.
(JPMorgan is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JPM? Learn more now.)