Thursday is one of those days when the action in individual stocks is better than the action in the indexes, which is mainly due to strength in small caps. Small caps have been lagging quite a bit for a long time, but some better speculative interest apparently arrived, as market players move away from Netflix (NFLX) and some of the big caps that have aggressive valuations.
It is a tired cliché, but it is more a stock picker's market right now, although some notable weakness remains in place. Breadth is running about 3,200 gainers to 3,900 decliners, which isn't bad for a day with the Dow Jones industrial average and Nasdaq down 0.4%.
I suspect now a higher level of worry about some of the big earnings reports. Microsoft (MSFT) has been a market leader and needs to put up strong numbers and good guidance to keep running. In-line numbers tonight are likely to result in selling.
It is still early in earnings season, but the response has been mixed. IBM (IBM) is one of the best so far, after being a serial disappointer, but the financials have been tepid on its reports and Johnson & Johnson (JNJ) a disappointment.
Typically there is a theme to earnings season, such as weak revenue, sell the news or good guidance. We don't know yet how this quarter is developing, but over the next two weeks many hundreds of reports will help paint the picture.
I'm sticking with very short-term trading right now and am fairly fast to lock in gains when I have them. This market is not producing good sustained momentum, so there is no reason to carry a lot of inventory.
Microsoft and Johnson & Johnson are holdings in Jim Cramer's Action Alerts PLUS member club.
