Yesterday’s bear market already over.
Nice gap to the upside today…as bear markets last one day these days. CSCO up nicely this morning on a 2% drop in sales and flat earnings.
The clue yesterday is what we wrote to you midday…FINANCIALS held and rallied right off the 50 day.
That said…internals have headed south with more and more names breaking support…BUT UNTIL MAJOR INDICES TAKE OUT EVEN SHORT-TERM MINOR SUPPORT…you know the next line!
Market way off early lows. Look where BAC, JPM and the whole XLF held this morning…right at the all-important 50 day moving average…a place in bull phases where the big boys stand up and defend the turf. This will be vital to the market that this area holds. When you have a chance scan those names as well as many other financials that are doing the same. BUT…it is early.
Also, very weak and under the longer-term 200 day average BIOTECHS finally bouncing today…but no leadership there.
Other than that…blah!
Futures down decently. My goodness. We may just get that whopping 1% bear market. (sarcasm)
Just remember what we have reported to you:
Our sentiment indicators have been flashing red for a few weeks. Bullishness and speculation have been rampant. Again, that does not mean a correction is ahead. Sentiment is a secondary indicator. It just means you are on the lookout.
Internals have been heading south. Again, this does not mean the end of the world is at hand but it means you are on watch.
New lows have been higher than new highs. This is amazing considering major indices have not budged.
TRANSPORTS have broken down at a minimum, on a short term basis.
Small caps have again started to under-perform.
Junk bonds have rolled over.
Financials have put in small to medium-size tops.
Again, all this with major indices not budging.
Just know these are the type of characteristics that lead to corrections of unknown price and time. One may or may not be at hand.
At this juncture, play it sector by sector, stock by stock. All kidding aside, we haven’t even seen a 3% correction since before the election. We are quite overdue.
We will be watching shorter term support levels on the majors as well as leading stocks and how they react to any selling. The 50 day average is 2-3% below these levels for the majors…so a little daylight to cover.
We believe this is a bubble. We also believe it can go much higher. Bubbles can go farther and longer than anyone believes. But to think this is a currency…not! This is not how currencies work. This is how speculation works. Good luck! As we have stated…just do not be the last one in…from wherever on whenever that is.
Quiet open. A couple of notes:
UTILITIES breaking out as long rates been coming down. Lower rates have caused FINANCIALS to back up.
The 9500 area may lend some support to the TRANSPORTS…right near the 200 day moving average.
Overbought ENERGY indeed pulling back but needs to be watched on pullbacks.
BWLD gets buyout proposal.
AAP and KLIC on the gap to the upside. KLIC looks like a breakway gap.
DKS to the downside. HD about flat off of their earnings.