An intraday dip in the S&P 500 and that pushed back to day highs in the early afternoon. Breadth is very strong at better than 2 to 1 positive and there finally is a few more new 12-month highs at around 50, but new lows are still running over 225.
On my scans of the market there is an unusual number of stocks that are up more than 10% today but most of them are coming off lows. Lower relative strength stocks are leading as market players are focused more on bargain hunting than trying to catch momentum.
The big challenge at this point in the market cycle is that although the indices are showing good strength, there are not a lot of good setups. If you use charts for individual stock picking you will find many oversold bounces off the lows but not much that suggests that the moves will be sustained. That is because, quite often, these early moves do not continue. It is only after the process of some retests and basing action that the supply of 'good' charts will expand.
Yesterday I mentioned a new buy of DryShips (DRYS) which is following through well today but it is tough to chase moves such as that. It just isn't possible to have a high degree of confidence that all these stocks that have been pounded lately won't see some overhead as stuck longs look for escape.
Tomorrow night are earnings from Apple (AAPL) and it will be a very dangerous setup if stocks continue to run up into that report. The reason the upside is working so well today was because expectation for Facebook (FB) had diminished so much. That will not be the case for Apple if it keeps on running up.
One report that many have on the radar tonight is Starbucks (SBUX) . SBUX is no longer the growth stock it once was but it is still often viewed as a value play. The stock trades with a trailing PE of 25 and saw EPS growth of 13% last quarter. That isn't an outrageous valuation for a company with SBUX's consistently, but even if SBUX beats the estimate of $0.60 for the third quarter it may have a hard time catching much momentum.
The SBUX chart actually looks pretty good here as it has held up during October while the rest of the market was destroyed. It is more of a safety stock these days which isn't a bad thing in the current environment but don't expect sustained upside momentum even if the report is solid.