We have some bounce action Friday morning as Thursday's doom and gloom created some oversold conditions that dip buyers are taking advantage of to end the week. It has been a good week for many bears and some are probably locking in gains in front of the weekend.
However, the bounce action isn't quite as robust as it looks at first glance.
While breadth running better than two to one positive, there is a good amount of skepticism. Indeed, there are only about 20 stocks that are hitting new highs so there isn't much wild momentum.
Traders are not yet convinced this market has seen the lows but they are happy to play some countertrend moves when the opportunity arises. These are flippers that will be quick to claim their profits at the first sign of weakness.
One of those few stocks hitting new highs is Disney (DIS) . That sort of relative strength attracts money in a market that is struggling and I have it on my radar for continues momentum from here.
Most of the smaller-cap stocks I follow are not doing too much, although it is more disinterest than systematic selling. Many smaller-caps are now close to being washed out, in my view, and they aren't going to do much to the upside until there is better action in the broader market. So, they may not go down much more, but they aren't ready to go up either.
PayPal Holdings (PYPL) provides a good example of the dilemma this market is facing right now. Action Alerts PLUS holding PayPal beat consensus estimates, raised guidance and has some positive analyst upgrades and comments. There is a strong bullish case for the stock and it is trading up about 9% on the news.
The problem for PYPL is that it is in the middle of nowhere on a technical basis. It still has significant overhead resistance at $87 or so on up and in this market it is very hard for momentum to develop. Strength is being used for selling and repositioning and there just aren't enough new buyers to keep a name like PayPal running higher.
PayPal may be a great value and have strong growth, but it is faced with a mediocre chart and a poor market. For those with a longer term, fundamentally focused approach that may not matter. However, if you want some fast results you probably won't see them right now.
The problem isn't the stock, it is the market.