Although the indices managed some gains on Tuesday, it was a mixed day with little momentum. The indices closed weak again and breadth was unable to make it to the 2-to-1 positive mark. Most of the day was spent dancing to headlines about the ongoing fiscal stimulus negotiations, which are turning into a classic example of political posturing.
The good news is that the choppy action has been productive as far as helping better chart setups to form. Also, good earnings news from Snap (SNAP) is helping to drive sectors such as social media and small-cap advertising.
While the Netflix (NFLX) report was disappointing the streaming giant was one of the few companies that missed estimates and is a reflection of how behavior during the Covid-19 crisis is starting to shift.
There are quite a few important earnings reports hitting here on Wednesday and we will have a better understanding of market sentiment as they are digested. Stocks such as Snap are going to help produce some pockets of positive action that will help prevent the sort of correlated selling that marks the typical correction.
For the last couple months, I have been pounding the drum about how individual stock picking has been far more productive than market timing and the big-picture macro arguments. There has been a steady diet of "good" stocks, although they can shift quickly and require vigilance.
As we head into the meat of earnings season this focus on stock picking should continue, but it will be complicated by election news and the fiscal stimulus issue. Market players are skeptical about how much help we will have from governmental policy, but they are still seeking out stocks with good fundamentals and charts and that is the key.
My biggest concern about the market in the next couple weeks is that the presidential race will tighten and there will be a greater risk of not having a clear winner on Election Day. I believe that scenario would trigger a run for safety and the focus on stock picking would go out the window for a while.
Currently, the focus is on earnings season and individual stocks but there is one eye on the fiscal stimulus circus that can cause some quick moves.
We have a slightly soft open but not much emotion in the early going.