The action today is a good example of how market conditions drive the way that news is viewed rather than the other way around. News isn't inherently bad, as you'd expect from a terrorist attack. It can be a positive for the market if the right conditions exist.
In the present environment, we have the likelihood of central bankers taking action to shore up any weakness caused by events like this. We are so used to the whole idea that "bad news is good" that even something as tragic as the events in Paris are shrugged off as just another reason for the flow of cheap money to continue.
It also helped the bulls today that things were already oversold. The buyers were ready to buy a dip today and this news was exactly the sort of thing that has rewarded dip buyers so often. Market players are so anxious to buy panic that they prevent it from even taking place.
While it ended up being a solid day of gains on good breadth, it is tough to count on sustained momentum at this point. We have minutes of the last FOMC meeting being released on Wednesday, and you can be certain that chatter over what the Fed will do next will pick up steam.
Overall, what we had today was a decent oversold bounce. Given the news backdrop, it caught some folks by surprise, but it is unlikely to be smooth sailing going forward. Although the bears were totally incapable today, there are still an awful lot of negatives out there that can cause some issues.
Have a good evening. I'll see you tomorrow.
Nov. 16, 2015 | 1:34 PM ET
Market Shrugs Off Paris Attacks
- ·The longer underlying support can hold, the better it will be for investors.
The market response to the terrorist attacks in Paris isn't what most market players expected. No one seemed to anticipate that there would be a longer-term impact on equities, but there was widespread belief that we'd have at least a little temporary selling on the news.
The market did dip for a few minutes this morning but the news has had almost no effect on trading. The main reason for that is simply that it doesn't come as a huge surprise. The likelihood of something like this occurring has been increasing steadily and it no longer has the same impact that 9/11 did.
Another reason that this isn't affecting the market is that it is likely to produce a tangible response rather than just more talk about how evil it is and how we will certainly do everything we can. The rhetoric has been endless and useless but now there is real determination to deal with the issue more forcefully, and that is a market positive.
A third thing that has helped today is that technically the market was already a bit oversold and ready for a bounce anyway. The buyers were lined up to pounce on weakness this morning and they had no choice but to buy strength instead.
I'm not at all confident that the corrective action that started last week is over but we are seeing underlying support. The longer it can hold, the better it will be.
Action in individual stocks is lackluster but this is productive as far as helping to build new charts of interest. I'm looking for buys into the close.
Nov. 16, 2015 | 10:47 AM EST
Now's Not the Time to Be Aggressive
- I'm anxious to put idle money to work but have little choice but to be patient.
The easy trade this morning would have been to buy a big gap-down open. Instead the least-expected thing happened and the market opened close to flat and now is drifting with a slight negative bias. Breadth is slightly positive and small-caps are lagging. Most of the strength is in more defense names such as gold, drugs and oil, but there's also strength in homebuilders and semiconductors.
What is most challenging about this sort of action is a lack of strong emotions in either direction. We aren't panicking but the buying is sedate. The FATMAN names, with the exception of AMZN and FB, are acting well but there aren't many big positive themes for traders to embrace.
I have been distracted lately so I don't feel that I'm fully in tune with the market right now, but even if I were, there seems to be very little edge. We are struggling to sort out the news flow and there is still great uncertainty about what the Fed will do next.
I'm anxious to put idle money to work but we have little choice but to be patient as things develop. I have a few odds and ends on my watch list that I have mentioned recently, like Mitek (MITK) and Energy Recovery (ERII), but there is no rush to do much.
My main concern is that when we fail to make any significant progress, the selling will pick up as folks move back to the sidelines to wait. This is no time to be aggressive with buys.
Nov. 16, 2015 | 7:52 AM EST
Forget Paris, Worry About the Central Bankers
- Will the Fed raise rates in December or punt once again?
The enemy for the fanatic is pleasure, which makes it extremely important to continue to indulge in pleasure. Dance madly. That is how you get rid of terrorism.
European markets, including France, are mostly positive Monday morning and early indications are that U.S. markets will open in the green this morning. It is good news for investors but it's a bit sad that the market isn't that surprised by a major terrorism attack in Paris. We have experienced these events often enough that they are now mostly taken in stride by the financial markets.
Over the weekend there were a number of headlines about a "temporary" selloff in the market. As it looks right now, the dip buyers aren't even going to wait for the open before they jump in and do their thing. Buying weakness on this sort of global news is a no-brainer given how the market has acted so often since 9/11. It isn't a big surprise and has already been priced into this market.
The bigger question will soon become whether the selloff last week was a sign of things to come or just consolidation and digestion after a big run off the September lows. The market cracked a few support levels and the technical condition of small caps in particular has eroded but the FATMAN (FB, AMZN, TSLA, MSFT, GOOGL (Alphabet) and NFLX) names remain in pretty good shape and this weak action hasn't been at all bad as far as helping new setups to develop.
What is really going to affect this market going forward isn't the terrorist activity but the financial responses of our buddies, the central bankers. There is talk about how this may lead to greater dovishness again and, given the inclinations of the central bankers in the past, it wouldn't be surprising to see them find reasons for more easing in various forms.
There still is a very good likelihood that the Fed is going to raise rates at their December meeting, but there is increased talk about the very good reasons why they should wait. Japan is officially back in a recession now and the problems with economies around the world persist. It is hard to reconcile the Fed's apparent determination to raise rates with the long list of negatives. The Paris attack is adding to the list of issues out there but it isn't something that is a huge surprise to the market. In fact this tragedy may actually result in a more effective response than what we've had in the past.
My game plane is to be patient and see how we develop from here. I do see a number of charts of interest but the potential for volatility is high and it is going to be tough to be very aggressive in building positions.
I want to thank everyone for the condolences on my mother's passing. All eight of her children were with her and it is our obligation now to do our best in our lives and celebrate her memory.