The S&P 500 closed almost exactly unchanged for the week. It was at 2,767.13 last Friday and finished today at 2,767.23. That sounds quite dull but it covers up what was an extremely difficult week for market players.
We started off with more pressure on Monday but that setup a giant oversold bounce on Tuesday with some of the best gains since March. The bulls were feeling a bit better about the market and were hoping for some followthough but the gains were completely given back over the next two days.
Friday ended up being an extremely choppy day with the DJIA outperforming due to a couple key names like Disney (DIS) and Procter & Gamble (PG) leading the charge. However, small cap action was dismal with the Russell 2000 ETF (IWM) losing a bit more than 1% and sitting not far from a retest of recent lows.
While there was some green on the screens todays there are no signs yet that the correction action is over. If anything the pockets of strength today look unsustainable but there is the possibility that the major earnings reports due next week will help to put a bottom in this market.
The primary problem right now is that the vast majority of stocks have suffered significant technical damage. They are struggling to find their footing and need to do some work to build support. The failed bounce on Tuesday helps to hasten the process but there can be a series of such failed bounces before a solid low is eventually formed.
The good news is that this action is creating good opportunities. The selling is not selective. Stocks are being punished without regard to their individual merits. At some point the names with better fundamentals will attract buyers and those stocks will greatly outperform. It isn't a question of 'if' but of 'when'. Our job is to stay patient, identify potential buys and then act aggressively when the time is right. It is easy when the action is so dismal but it will pay off big when the market action improves.
Next week the major earnings reports should provide some additional excitement and that is a good thing. What we need is a market driven by stock picking rather than macro worries. Earning reports can help in that regard but so far the reaction to earnings news has not been too impressive.
Have a great weekend. I'll see you on Monday.