Late weakness took some of the shine off Wednesday's follow-through bounce, but the buyers have regrouped here on Thursday morning and are producing a positive open. Stocks around the world held up well, which may be a function of putting October in the rear-view mirror and hoping that November will be the start of an end-of-the-year rally.
If stocks hold up on Thursday it will be the first three-day bounce for the indices since mid-September, which would create an interesting technical setup going into what is likely the most important earnings report of the season -- namely that of the mighty Apple Inc. (AAPL) .
The recent corrective action intensified greatly due to negative responses to the FAANG stocks. Facebook Inc. (FB) was already so badly beaten up that it was able to rally on a mediocre earnings report, which helped trigger the bounce that started on Tuesday. (Both Apple and Facebook are holdings of Jim Cramer's Action Alerts PLUS charitable trust.)
If Apple was still at the levels it hit on Tuesday the likelihood that a so-so report would be bought would be much higher, but expectations now have shifted and the danger that there will be a sell-the-news response has intensified.
There has been much speculation that the new iPhone offerings have not been selling that well, so a big blow-out report from Apple is not expected. However, the market has grown used to very solid reports from Apple even when the pessimists warn about slowing growth and poor product acceptance.
Back in the Steve Jobs days Apple was notorious for low-balling guidance. The question wasn't whether Apple would beat estimates but by what magnitude. Management no longer plays that game, but the market probably won't be too happy if the numbers are merely in line.
Apple is going to have a major impact on this market. This bounce has some folks convinced that the worst is over, but there isn't any good reason to expect stocks to continue straight up from here. The longer support levels hold, the better the chances that buyers will start to put more capital to work. However, as we saw into the close on Wednesday, there are plenty of holders who are looking to escape into strength. That is what overhead resistance is all about, and there is plenty of it.
Stay strategic and manage your positions closely. If you do that, then you won't need to worry too much about the market gurus and their histrionic market calls.