Good earnings from Goldman Sachs (GS) and Bank of America (BAC) gave the market a boost, but the momentum cooled during the day and the indices closed near the lows of the day. There was still plenty of green on the screens with breadth running 4,800 gainers to 2,400 decliners but there were quite a few intraday reversals and not many names stocks finishing strong.
The big positive today was that there were some robust earnings reports. We had rallied on Tuesday despite some bad news so it was helpful to give buyers some solid reason to keep this bounce going.
Technically the indices are still overbought and confronting substantial overhead. There has only been one slight pullback since the bottom occurred on Christmas Eve. That pullback occurred January 3 when the S&P 500 dropped 0.53% and was immediately reversed the next day.
The healthiest thing that could happen to this market is that there be some downside action. This would appease some bears, allow some profit taking and help to make sure there is some good support. There are plenty of bears growling about a potential retest of the December lows. If that does occur I don't expect it for a while. In the near term we just need some sort of pullback just to test the resolve of the recent buyers. Of course earnings are going to have a substantial impact on the direction.
The market mood is increasingly complacent now that we have moved straight up for nearly three weeks. That suggests that a pullback will catch many by surprise and that selling could accelerate pretty quickly as recent gains are protected.
I'm still waiting for signs of weakness to take a more bearish posture and it still isn't happening to any great degree.
Have a good evening. I'll see you tomorrow.
