We are in event driven mode. When we get a negative headline, the market gets hammered. But when we have an absence of negative news, guess what? The market bounces. It bounces because it is really oversold and a lot of the sellers, the forced sellers, are now out of the picture.
Funny, when you borrow money from a broker, and you can't pay the broker back, you are pushed out of the picture pretty quickly by a margin clerk demanding you raise money or else. Those sellers are nowhere to be found.
In fact, now we have gone from fearful, when we saw that whoosh bottom yesterday, some 450 points ago, into complacency, as in all's well. Many people think we are just out of the woods.
That's exactly what checklists are made for. Checklists can give you an investable bottom, not a tradable one where we have to sell strength because things aren't all that resolved.
Remember, I want to be opportunistic and I want to make as much money as possible, but I also am willing to risk some upside if we don't have enough things going right to keep us from being blindsided. Sure enough, we got some good checklist news today, which is why the market was able to move up a tad.
What went right? First, oil found its footing. Oil has been in freefall for weeks now and we would love to think that is a huge positive. But this is a very counterintuitive market. It wants oil low, but not too low. I get that: We want gasoline to be cheap enough to create the equivalent of a tax cut but we don't want it so cheap that it threatens the energy renaissance, which has been such a huge job provider for our country. We don't get these really terrific weekly job numbers like we had it this morning if oil goes too low.
Has oil finished going down? I think that we had the same consensus that oil had to go down huge when it hit $80 per barrel as we did when we thought oil was going higher at $100. I don't want to be complacent. Nothing's happened with oil to think that it can bounce big because there have been no cutbacks in oil production, just threats of it. I also didn't like that quarter from Baker Hughes (BHI), the huge oil field service company. To me, that read as though the boom in drilling could be tempered.
I like that we saw a key speculative stock get pancaked. We know there's been way too much speculation of late. Netflix (NFLX) has been the epicenter of speculation because it has had a terrific momentum story based on signups. The company failed to live up to its billing on that score and it got crushed. That's a nice box being checked.
We saw some beats and raises, too, notably in the healthcare sector with Dow stock United Health (UNH) putting up a terrific number and HCA delivering a huge increase in earnings. HCA (HCA) took the extraordinary move of pre-announcing its earnings because they were so much better than anyone thought -- particularly those who bet against the hospital chain thinking that expenses would have to ramp up to meet the needs of future Ebola victims. That didn't happen.
But don't get cocky. Goldman Sachs(GS) reported a terrific number and its stock was hammered anyway simply because the CEO didn't jump up and down and say things are fabulous, even though investment banking is the strongest in seven years. That was totally bizarre. The banks remain a really bad place to be. The banks and tech, another group that has been performing terribly, have the two biggest parts of the S&P 500 show. Call that box half-checked.
We saw another box half-checked when all stocks were hit at the open. This is something I wanted to see because a real low requires more shaking out. It was hideous, a sea of red, a residue of a huge drop in the S&P 500 stock futures at about 5:30 a.m. on some news ostensibly about problems with Greek bonds. Believe me, I saw it happen and there was no other news. At that exact moment, interest rates plummeted with the 10-year Treasury note shooting below 2%. Rates, however, spent the rest of the day going higher, and that, plus the rally in oil, sent the market higher.
I am never crazy about stocks going higher on a move up in rates and oil, but, again, this market fears a big decline in economic growth. In real life, we want interest rates low to start another refinancing boom, something that Wells Fargo (WFC) said was actually happening on Twitter today. We don't want to lose that. Nor do we want gasoline headed back to $4 per gallon. But the stock market is not the real world. If it were, it would be a heck of a lot easier than it is.
But, remember, my view. The market can get a tradable bottom off yesterday's low but I want an investible bottom where we don't have to worry about getting our heads cut off if we do some serious buying. A market that can decline the equivalent of a percent and a half between 5:30 a.m. EDT and 5:45 a.m. EDT on no new news isn't that kind of a market.
You know why that is? Because there are still so many unchecked boxes. Here we go. Is Ebola under control? We heard of no new outbreaks today, which made people forget the scourge for a day. But that doesn't mean it is under control. If there is another negative incident, we will find the market back down a percent or two or even going back to the whoosh low. Ebola's incredibly important to the psyche of this market and right now there is no confidence that the government has it under control. An absence of bad news in a 24-hour news cycle does not a containment make.
Tech hasn't stabilized. Other than Skyworks Solutions (SWKS), the cellphone parts company, I continue to see weakness in tech. Apple (AAPL) has a new product intro and the stock got hammered. That's not strength. Intel (INTC) went down again on what was a pretty good quarter.
And the technicals, the charts, haven't stabilized. We held a floor on both the S&P 500 and Dow but we were knocked back precisely at resistance. Better than nothing but most technicians I know didn't find too much to be crazy about.
Finally, I am not happy with what's happening overseas. If you go look at the stories in the foreign papers about Vladimir Putin, then you know that he's talking openly now about cutting of Western Europe's natural gas line. If you think this madman is done raising havoc, you are wrong.
I read a piece of journalism about how ISIS was stopped by a bombing run. But that doesn't count as containment. I expect both Russia and ISIS to plague us again, and we will get fears of just that going into the weekend in tomorrow's trading. China? We tend to forget that China's lurking is a negative. Did you see anything good about China? I didn't.
So, when you get some boxes checked and you have no new negative Ebola news, the fundamentals for some companies can surface and give you some good trading gains. But I would like to see a preponderance of boxes checked before I sound an even tepid all-clear signal.
We didn't get that. The bulls have to content themselves with the idea that the market can rally in the absence of bad news. But I need some good news on many fronts to say that this is a market where you have to pour cash into because the train is leaving the station. A couple of boxes checked just doesn't cut it for me.
