In the early going, it looked like yesterday's selling was going to be a one-and-done situation. Despite a negative reaction to Intel (INTC) and JPMorgan (JPM), we managed a positive open. A bit of a bounce in biotechnology helped and the FANG names -- Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL) -- were attracting money that was looking for a place to go. (Facebook and Google are part of TheStreet's Action Alerts PLUS portfolio. Amazon is part of the Growth Seeker portfolio.)
Unfortunately, the bad news started to flow. Wal-Mart (WMT) and Boeing (BA) were the primary villains as both are failing to effectively navigate a tough economic situation. BA is suffering from weak demand for aircraft and WMT is dealing with flat growth, higher costs and currency issues. The problems there weighed on the entire retail sector and put a damper on the slightly positive sentiment that had been developing. (Boeing is part of TheStreet's Trifecta Stocks portfolio.)
While there is plenty of gloomy news to contend with, the selling so far hasn't been bad enough to completely kill the rally that started on the bad jobs news. The S&P 500 is still over the 50-day simple moving average, but the iShares Russell 2000 ETF (IWM) and Nasdaq have taken out some support. It is imperative that we find some stronger support soon, and fortunately we don't have any really important earnings until next week. NFLX reports tonight but that is a company-specific event without a lot of sympathetic effect.
While the mood right now is quite sour, the bulls still are in position to make another run. The big problem is the news flow. We just don't have any major positives right now, and that is empowering the bears and keeping money on the sidelines. It won't take much to spike this market back up, but we need some good news to provide an excuse. There is little choice but to stay cautious.
Have a good evening. I'll see you tomorrow.
Oct. 14, 2015 | 1:37 PM EDT
A Market Malaise
- · But the mood shifts quite fast on upticks.
After the minor opening strength was sold, the market found its footing and is now back near flat. Bids are finally showing up in biotechnology and Intel (INTC) shrugged off its early weakness and is leading the semiconductors. The FANG stocks lost their early momentum and are mixed now. Breadth is running just slightly ahead but the bounce off the lows helped to shore up confidence a bit.
The big challenge of the market is that we really don't have sustained momentum. Reversals and bounces can make for great trades if you time them, but if you seek to build position trades, it is extremely challenging.
Quite a few traders are focused on trying to bottom fish biotechnology. The Democratic candidates' debate was a nonevent for the group and many of these names are quite oversold. A few on my radar are bluebird bio (BLUE), Genocea Biosciences (GNCA), Esperion Therapeutics (ESPR), BioTelemetry (BEAT), Trevena (TRVN) and Oncothyreon (ONTY). If you are playing in this realm, it is imperative that trades be managed closely.
In the bigger scheme of things the technical action is still quite positive. The SPDR S&P 500 (SPY) is still above its 50-day moving average and there doesn't seem to be any real panic or fear. There is just a general malaise and the mood shifts quite fast on upticks.
I'll continue the hunt for new buys but it is much harder than it should be, which tells me this market still has issues.
Oct. 14, 2015 | 10:53 AM EDT
'Hot Pockets' Are Hard to Find
- This is more of a market for bears to fade than for bulls to buy.
The market focused on a few of the better earnings reports and managed a bit of a bounce this morning but it isn't gaining much traction. While breadth is solid, with about 3,300 gainers and 1,800 decliners, there aren't any pockets of particularly "hot" action. Biotechnology managed a bounce after being clubbed yesterday and we have some strength in precious metals.
The "FANG" names were all green to start the day but are fading. Other big-cap technology names, most notably Apple (AAPL) and Tesla Motors (TSLA), are stumbling around. AAPL has not been very helpful to the bulls lately and is showing indications of rolling over again.
Although there is some green on the screens it seems to be more of a market for bears to fade than for bulls to buy. There simply isn't enough momentum to justify many buys. If you have a longer term timeframe you may find it prudent to slowly average into some things but from my standpoint there just isn't any compelling reason to put cash to work. I want to buy stocks that have the potential for sustained upside moves and I simply don't see many right now.
While this action can be a bit irritating it is just part of the cycle. If we stay patient the character of the action will shift again. The important thing is to protect capital and maintain a positive mindset.
Oct. 14, 2015 | 7:34 AM EDT
No Good Setups and High Downside Risk
- In this tough market, there is no reason to rush in.
If you don't like something change it; if you can't change it, change the way you think about it.
-- Mary Engelbreit
Intel (INTC) kicked off the 'real' start of earnings season, last night, with a whimper. While the numbers were a bit ahead of estimates, forward guidance was weak. The company attributed the soft expectations to "weaker than expected macroeconomic growth." The stock is trading down a bit less than $1 in very early going.
JPMorgan (JPM) didn't help matters, as it reported a 15% drop in trading revenue due to "market volatility," and stated that fourth-quarter estimates "appear high." The stock is trading down $1, as well. European chipmaker ASML (ASML) issued a disappointing report early this morning, and is down $2 as I write.
More reports will be rolling in, but so far the theme is not positive. There are obvious concerns about the strength of the global economy. While the numbers aren't terrible, the guidance is not very upbeat. We have Netflix (NFLX) reporting tonight, and Action Alerts PLUS portfolio holdings Bank of America (BAC) and Wells Fargo (WFC) yet to come, this morning.
The bigger issue, now, is whether earnings will be used as an excuse to accelerate the selling that finally kicked in yesterday. The indices enjoyed quite a strong run following the lousy September jobs news, and even managed to take out some key technical resistance. But will this pullback develop into a failed bounce or will it be just a pause that refreshes and sets us up for another leg higher?
We still have the ongoing debate about the timing of the FOMC interest rate decisions, but no one expects anything at the upcoming meeting. Fed members continue their confusing and unhelpful public discussions, which jerk the market around from time to time.
One worry that will start to build soon will be the possibility of another battle between Congress and President Obama over the debt ceiling. The deadline isn't until early November, but the market has not handled prior debt ceiling conflicts well, and that is going to make some folks nervous.
Yesterday, biotechnology and drug stocks were hit the hardest in the general selloff. That was due to worries that there would be more attacks on drug pricing in last night's Democratic debate. While there was some talk about "evil" drug companies in general, there wasn't much specific on this issue. I expect to see some brave bottom-fishers inch into the group today.
Overall, the biggest problem the market faces right now is the lack of good setups. If you are an individual stock picker, there simply isn't much out there that you can bite into. The four FANG stocks (Action Alerts PLUS portfolio holdings Facebook (FB), Apple (AAPL)and Alphabet (GOOGL), along with Netflix) have been showing some slight relative strength, but they rolled over with the rest of the market yesterday and may have some issues to deal with as a result of the generally poor earnings news.
It is a tough market environment with a high risk to the downside. There is no reason at all to rush in, which makes for a dour and unexciting market.