For a long time now the easiest mistake to make in this market is to be prematurely bearish. Even when there has been some weak price action and warning signs, the bears have been unable to close the deal and push the market into a downtrend.
Once again there is some troubling action and a number of warning signs that require increased vigilance and a higher level of caution, but there is still no sufficient weak action to go full bear. There are still dip buyers jumping on intraday weakness and the indices are staying above key technical levels.
The main negative currently is the reaction to earnings reports. Very strong news from both Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT) failed to take the broad market higher. Weak news from 3M Corp. (MMM) , United Parcel Service Inc. (UPS) and Intel Corp. (INTC) is causing concern and giving the bears some ammunition for the narrative that there is slowing economic growth.
The Amazon report Thursday night was solid but the stock isn't doing much on the news and is showing some inclination toward a "sell the news" reaction. We'll see how it develops as the day progresses, but both Facebook Inc. (FB) and Microsoft ended up closing near their intraday lows after good reports.
The bulls will argue that Intel is a company-specific problem due to its exit of the 5G market, but it is a bellwether stock that has marked turning points in the past. We don't want to jump the gun and declare that this uptrend is dead, but we need to watch for further signs that there are problems
One issue that may complicate things is that the China trade negotiations are heating up again and President Trump indicated the Chinese Premier Xi may be visiting the White House. The market isn't taking the recent talk seriously, but there is always the potential for a positive headline that may trigger buy algorithms. If the market starts to struggle more, there will be a greater potential for such headlines.
My approach to the market here on Friday is to stay open-minded and not be dogmatically bullish or bearish. I am concerned about some of the action I'm seeing in response to earnings, but there is not sufficient evidence yet to be aggressively negative. I'll be managing my positions closely and will be quick to cut anything that is struggling to hold support levels.
We still have a number of big earnings reports to come from the likes of Alphabet Inc. (GOOGL) and Apple Inc. (AAPL) , but the focus will be more on smaller reports in the weeks ahead. These reports often contain some significant landmines and I find the period to be quite difficult at times.
We have a negative start to the day but it is rather mild so far.
