It was a day of mild gains but it was much better than it looked as the indices bounced back from a very poor open and saw some intraday dip buying as well. Internal action improved nicely and there were 4,800 gainers to 2,500 decliners by the close. There still aren't many stocks near highs but that isn't a surprise given how far the indices have dropped.
There were some signs of the "January Effect" today which is the tendency to buy stocks that have been beaten down due to tax loss selling. Many small caps were coming off their lows as selling pressure was relieved and bargain hunters started to do a little shopping.
The biggest problem the market faces right now is that the S&P 500 is up 6.8% since the beating it took on Christmas Eve. It has gone from grossly oversold to somewhat overbought and could use some consolidation. Of course there are some optimists that are looking for a V-shaped move but they are ignoring how badly many market players were beat up recently. There are a supply of folks that would be happy to escape this market if they can recoup some recent losses.
I'm expecting a pullback and it looks like we may have the catalyst hitting after the close as Apple (AAPL) cuts guidance for the first quarter. Expected revenues are lowered to $84 billion from analyst estimates of about $91.5 billion.
This news is not unexpected. The stock has already dropped $75 from its highs but the question is to what degree is this already priced in. The stock is halted as the news is digested but the Nasdaq 100 ETF (QQQ) is trading down 1.4% after hours.
Market players are going to worry now that more warnings are on deck. Its been a good bounce over the last 4 trading days but now it will become much more difficult
Have a good evening. I'll see you tomorrow.