Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
In the end the stock market is a market of stocks. We talk about the averages a lot because frankly people have measured that 70% of a typical stock’s movement is dependent on the overall market. Put another way, it is very difficult to be a trout and swim against the current. The past few weeks I have seen more blow ups than the entire first 3+ months of 2012. Yesterday an analyst mentioned a price cut for mattress firm Tempur Pedic (TPX) and the stock fell 20% at worst levels. Also, unlike January 2012 earnings misses are being punished horribly. Even earnings beats with weaker than expected revenue growth are being hammered. Today’s examples will be Rackspace Holdings (RAX) and Fossil (FOSL). Last, companies who ARE beating estimates are in many cases not holding their gap ups – I will point to LinkedIn (LNKD) which jumped from 110 range to upper teens/120ish on earnings and has given it all back.
There are some holdouts/exceptions like Amazon.com (AMZN) and Zillow (Z) but again, those are the trouts in the stream. Most of the rest of the fish are having trouble. So as we look at the indexes, we have to remember these are actually made up of something…individual stocks. And outside of a few groups like REITs, homebuilders, and some utilites…. along with a narrowing group of ‘story stocks’, things are getting dicey. So the odds are not in one’s favor in finding those trouts and missing out on all the other types of fish.
Again, during any pullback we’ll have some tremendous oversold bounces along the way but guessing when and where is only for the most nimble. On the S&P 500 all eyes remain on S&P 1357ish area as that was the bounce area the previous two visits.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
