Have we overcome the power of negative thinking?
Or is this a couple of days' reprieve?
It's always hard to tell these things. It's kind of like a football game where you get to play quarterback.
You want to know if you should hand it off or pass and you need to do a check-down to be sure it's the right thing.
Let's get one thing straight between us: we have to recognize that, like a football game, there are four quarters to these sessions these days.
The opening, the first quarter, the market took a header, led by the Nasdaq. Then the second quarter the bulls hit paydirt. But around noon the bears clawed their way back, until the fourth quarter when we got a terrific rally.
In these kinds of four quarter sessions you are looking for themes that transcend the game.
Here's what I saw that justified a rally.
First, the S&P's proprietary oscillator that I pay a ton for finally hit negative six. Remember, Karen Cramer, who ran the trading desk at my old firm, was a true believer that you can't stay short passed minus 5 and you have to buy something at minus six. You should be "money in" here, meaning that at the end of the day you should be putting more money to work than you may been taking out these last few weeks. Yes, the oscillator is that important to me and it has been really wrong during systemic risk, like what we saw in the Great Recession. I have said many times that we are not going to have a recession but we could have a severe slowdown if the Fed isn't careful. So I think the oscillator could be telling the truth.
Second, it's finally in sight: I am talking about the end of October, which should relieve some selling pressure because it is the end of so many mutual funds' fiscal years. Today and tomorrow have been seasonally strong.
Third we finally had the down opening I was looking for. The first quarter has been a time when the bulls have been picked off and beheaded over and over again because things "looked really good." That didn't happen today.
Fourth, some groups that have been in horrendous bear market mode, groups like the defense stocks, finally caught a bid, something that seemed impossible until we got through the mid-term elections.
Looks like they have come down far enough to actually attract buyers no matter what.
The semis bounced too, something that seemed inconceivable 24 hours ago. Nvidia (NVDA) finally went higher, glory be, down 100 points from its high, it's about time.
Finally, we got a good interpretation on bad news. Masco (MAS) , the big kitchen and bath company, reported missed its quarter and slashed its outlook. Man, oh man, it was hideous and you have to believe that it was so ugly it could take the whole group down.
Nope, the stock, after hesitating around the flatline then exploded higher finishing up about 8%.
Now, the power of negativity still held sway with Amazon (AMZN) and the gloom was palpable for General Electric (GE) after a gigantic charge and a huge dividend cut. IBM (IBM) went down for a second day on its purchase of Red Hat (RHT) which seems silly if you ask me. Mastercard (MA) delivered beautiful earnings but, like First Data (FDC) yesterday, it got hit showing the vulnerability of fintech. And Pfizer (PFE) and Allergan fell into the drug doggie house. Still, a quarterback could find five targets open today: the oscillator's negative reading, the end of the horrendous month of October, a down opening that didn't hurt anybody, a couple of bear markets look like they may be morphing into bull mode and we had a positive interpretation of negative earnings news including a big estimate cut. Five receivers wide open: let's see if tomorrow's game gets a long-awaited winning streak going.
