We have gap-and-fail action this morning as stocks started strongly due to news that China was cutting some Covid restrictions, but stocks reversed to the downside quickly and are now seeing downside momentum.
As I discussed in my opening column, the biggest obstacle this market is facing is that there is not the same level of liquidity that we have seen in the past, which helped to drive "V"-shaped moves. There just isn't enough juice to keep things running, and when things are not running, then we don't see the development of fear of missing out.
In addition, we have a market that is largely driven by indexes, futures, and exchange-traded funds, rather than stock picking. Investors are more focused on gaming the direction of the indexes than they are on finding good, solid stocks to buy. This is typical of a bear market when fundamentals just don't matter as much, and it makes it quite difficult to find safe havens when there is selling pressure.
One problem today is the reaction to earnings from Nike (NKE) . The company beat estimates mainly due to a tax benefit, and it announced a large stock buy-back, but guidance was soft mainly due to China, and there were at least 10 analysts cutting targets.
Earnings season is still a couple of weeks away, but we have to wonder if Nike is an illustration of what may await us as other reports start to roll in. The market had not lowered expectations enough going into the report, and now it has to reprice the stock lower.
We had a pretty good counter-trend rally on Friday, and so far, there is some underlying support, but do not forget that we are still in a bear market, and the path of least resistance is to the downside.
I added to old stock Northern Oil & Gas, Inc. (NOG) this morning, but otherwise, I am doing very little.