On Thursday morning the market was oversold and in technical position for a bounce. The Brexit drama kept buyers on the sidelines to start the day but then some rumors about progress on a trade deal with China gave the buyers an excuse to jump in and push the indices higher into the close.
Rumors about the United States putting the imposition of tariffs on Chinese products on hold proved to be false but market players remained optimistic that maybe something positive could happen on trade when President Trump and President Xi meet in Argentina at the end of the month.
Conditions looked pretty good for some follow through but a negative reaction to some key earnings reports hit overnight and that is putting pressure back on the market Friday morning.
Nividia (NVDA) is trading down around 18% in very early trading after cutting revenue guidance for next quarter by about $700 million. There are a number of downgrades but there are some analysts that believe it is a buying opportunity.
Nvidia's poor news is spilling over to the technology stocks in general and chips in particular. It also isn't helping that Facebook (FB) is facing more criticism for the way it handled Russian meddling and various privacy concerns.
In addition to NVDA, there is a negative reaction to Nordstrom (JWN) . That report wasn't terrible but in the current market environment even strong reports such as the one from Walmart (WMT) Thursday are being sold. The market dynamic right now is to sell news, good or bad. Market players want to escape this market and are looking for any reason to do so.
Whole both the technology and retail sectors are under continued pressure there were a few positives in smaller-cap names and some beat-up sectors like biotechnology and oil. These groups have been the laggards but there were some signs that bargain hunters were starting to pick at a few things. The buying was very tentative, though, as the vast majority of charts are terrible but some stocks were groping to find support.
Overall the market remains in very poor technical condition. However, we have to watch to see if a rally attempt might develop into the end of the year. That will depend to a great degree on any progress on trade with China and the level of hawkishness we hear from the Fed, although this market is now beaten up enough that some sort of rebound is likely reflexive.
As always I would not anticipate a market turn. We have to respect the current price action and stay defensive but be quick to respond if conditions change.
The soft open Friday morning may not be a negative as it keeps sentiment negative. However if there is a reversal to positive after the open it could gain some energy as repositioning and short-covering occurs.
This is a difficult market and high degree of flexibility is required. We aren't going to find many good charts but that doesn't mean we won't see some bounce plays.