Positive action overseas is having only a limited impact on futures in the U.S. in the early going. Asian stocks jumped sharply after promises from China's Xi administration that more stimulus was coming along with tax cuts in hopes of boosting GDP by one percentage point or more. In Europe, Italian bonds were not cut to junk status as some had worried, which provided a boost, although the Italian budget is still a problem
Despite a move of more than 4% in Shanghai, early action in the U.S. remains lackluster. There is still significant technical damage to overcome and the bounce action, so far, is not helping to bolster sentiment.
Market players have hoped that earnings news would bolster the overall market. So far that has not been the case, although there were some positive signs on Friday as Procter & Gamble Co. (PG) and Walt Disney Co. (DIS) broke to new highs on positive earnings speculation.
This week will be the real test of the market's attitude about earnings as heavyweights such as Amazon.com Inc. (AMZN) , Alphabet Inc. (GOOGL) and Intel Corp. (INTC) will report. The setup for these stocks is good as expectations have come down and they are well off the highs they hit earlier this year. A theme typically will evolve during earnings season, but so far it has been a generally negative one as banks and Netflix Inc. (NFLX) have responded poorly to generally good numbers.
The big challenge this week will be trying to gauge when an oversold bounce might gain some traction. The technically inclined are looking for maximum oversold conditions to occur in the next couple days, but even if a good bounce occurred there will be some skittishness in light of how quickly the big bounce that occurred last week disappeared.
The market is still going through a corrective phase and will need some time for it to play out. There are very few positive charts out there, though many stocks are washed out and look like they are trying to find support. There is no good upside momentum right now and if you are buying it may require some patience before stocks start to turn up.
At this juncture the most important question to ask is how anticipatory you want to be in looking for a sustained bounce. Too often, market players are overanxious in looking for a turn as they want to buy at the exact low. They idea of being late to the party seems to trouble many traders even though it really is the better approach in most cases.
The idea isn't to buy stocks at the exact lows, but to buy them when they have the best chance of producing sustained positive moves. You want to keep risk as low as possible, and the best way to do that is to wait until there are some signs of buying first. You do not need to be early to catch a substantial move.
If you stay focused on buying positive action rather than buying into the teeth of a decline it changes the way you look at the market. When the action is weak you simply ignore it and don't fret over how much longer it will last. When there is positive action, you focus on your shopping list and start making some partial buys.
There is some early positive action this morning, but it is unconvincing. Don't be in a rush to join the party. It is better to be late than early.