We started off the day by building on yesterday's unexpected rally, but the buyers just didn't have much staying power. The action fizzled out around midday and then various reports of more terrorism plots helped to pressure things into the close. Breadth was positive early in the day but ended up rather poor with just 2,400 gainers to 3,400 losers.
The basis for the rally in the first place was never that strong. It had more to do with technical reasons than the actual news flow, and the forces to drive that were pretty well used up by late morning. The simple fact remains that we have a long list of negatives out there preventing the bulls from gaining traction.
Tomorrow we have the minutes of the last Fed meeting, so we'll definitely have some chatter about the timing of "liftoff" again, but the terrorism threats are going to continue to grab attention and give the bears some ammunition.
Technically, the reversal today suggests we have potential for a bigger pullback. The S&P 500 was stopped right at key resistance and there aren't many positives right now to drive us. The best thing the bulls have going for them is that the bears are incapable of any real pressure, but when we have an intraday reversal like we saw today, the advantage shifts back to the pessimists.
It is a tough slog out there and the best thing we can do is recognize that fact.
Have a good evening. I'll see you tomorrow.
Nov. 17, 2015 | 1:56 PM ET
For Market Strength, This Is Pretty Weak
- ·Stocks drift lower amid lack of interest.
We drifted higher this morning and are drifting lower this afternoon. Breadth is back into negative territory with about 2,650 gainers to 3,050 decliners. What is most notable is the lack of energy in either direction. The bulls did push us up pretty well at midday, but there simply isn't enough interest to keep things running.
The indices are close to testing the early lows, and that is not a good sign at this point in the day. The bulls had done a nice job of taking advantage of bears who were caught by surprise when we rallied on bad news, but they don't have the fuel to really keep pushing.
It has been an odd couple of days for the market. Rather than a selloff on bad news and a bounce, which would have been very logical, we end up with lackadaisical strength. Neither bulls nor bears were expecting this sort of action and that helped to prolong it as they repositioned.
We'll see how we close, but it looks like the bulls are losing their edge. The market beast has sucked in some capital and has trapped some bulls who were fearful they would miss out. The S&P 500 is running into resistance right at the 200-day simple moving average, which makes sense, but if you are trying to use logic to navigate this market, it has been extremely difficult.
Nov. 17, 2015 | 10:55 AM ET
Trying Hard to Put Cash to Work
- · But there isn't enough market momentum to justify aggressive positions.
The opening gap-up did not hold and the market action is mixed so far. Breadth is running about 2,400 gainers to 2,850 decliners and strength in biotechnology and retail is helping the bullish cause. The FATMAN (FB, AMZN, TSLA, MSFT, GOOGL (Alphabet) and NFLX) names are mixed; gold, and oil are the laggards.
What is most notable about this action is the lack of emotion. You might think that given the news flow we'd have high levels of volatility as a result, but while we are moving around a bit, its more random than anything else. Market players are acting greedy or fearful. They are acting confused and uncertain, and that gives us slow and random action.
I'm struggling again to put cash to work. A few small-caps I've mentioned recently -- Achillion Pharmaceuticals (ACHN), Trevena (TRVN), Mitek (MITK) and Energy Recovery (ERII) -- are on my radar but there isn't enough momentum to justify aggressive positions.
The key is to keep on digging for things of interest. The highs of the day are in sight as I write, and the tone is improving. It appears that I'm not the only one trying hard to put cash to work.
Nov. 17, 2015 | 6:37 AM EST
Investors Are Still Conditioned to Buy the Dips
- And central bankers still hold the key to this market.
"I have learned that the greater part of our misery or unhappiness is determined not by our circumstance but by our disposition."
The market surprised many traders and investors yesterday with how quickly and easily it shrugged off the Paris terrorist attacks. Practically no one expected there to be a long-lasting change in market behavior due to the news, but it was widely anticipated there would be at least a temporary dip as the news was digested.
What the pundits overlooked was that market players are conditioned to buy any and all dips, except for a few that are created by central bankers. Bad news is never bad for long, because it means that the central bankers will ride to the rescue once again, with more quantitative easing and low interest rates for longer periods of time.
In addition, dip-buying is so routine we see a Pavlovian response. Market players don't even think about how they are buying. They simply do it because they are consistently rewarded. The more automatic it is, the more market players pile on and guarantee that it will occur.
One of the ramifications of this very quick and intensify dip buying is that it produces conditions for more upside momentum. Obviously, shorts are squeezed and they provide further upside as they cover and try to catch a top over and over again.
In addition, this sort of action creates a large supply of underinvested bulls. The folks that did a nice job of positioning for last week's weakness and were looking to inch back in when we gapped down are suddenly scrambling to put idle cash back to work. The carefully crafted plan of jumping back in as the market pulled back and found support is out the window, as the sudden surge and the propensity for V-shaped moves takes hold.
That is where we are this morning. The response to the Paris tragedy caught bears and bulls by surprise, and now they are anxious trying to reposition, which is driving us even higher. The fact that we were oversold at the close on Friday is producing a tailwind, and we are now back to testing the 200-day simple moving average of the S&P 500 at the open.
As is usual, the bears are already focusing on their long list of negatives to argue why this bounce can't last. There are the usual weak economic news and the lackluster earnings reports, but still central bankers are the key to the market.
There were some arguments yesterday that the events in Paris might push the Fed to forego its rate hike at the next meeting. Some felt that was the catalyst for the bounce yesterday. I have doubts that it was what drove the action, but it shows us how much the market is still focused on everything the Fed might do.
At this juncture, the bulls have the momentum again and if they are going to stumble it is most likely going to be due to something from the Fed. The Fed seems determined to get this rate hike out of the way, but any more fallout from Paris or unusually weak economic news is going to push them back, and that will be a market positive.
It feels quite illogical for the market to react to a terrorist attack in such a positive manner, but in view of the conditions created by central banks over the last six years it isn't that much of a surprise. Nothing matters more than the endless supply of cheap cash, and tragedies like Paris assure it will keep on flowing.
We have a good sized gap up open on the way, as overseas markets reacted to the positive action in the U.S. yesterday. We have the CPI number coming up, which may cause a bit of a jiggle, but with earnings season over, there isn't much news on the agenda.