Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
It is quite obvious to point out the market has been behaving poorly the past few weeks. Since the Sep 14 “QEinfinity” high, the market has made a series of lower highs – Thursday’s was the latest. The action is somewhat similar to April’s in that the market is fighting and it’s not a free fall (excluding the NASDAQ), but the moves up are short term and quite fractured. This last one was all of 1 day and 1 hour. Seeing good news sold is also not a net positive. The behavior in copper and oil is not a positive. Even gold (and silver to a greater degree) took it on the chin Friday. I’d argue the complete disembowelment of major names in the tech space is also a major negative.
When you can only make money on the glamour tech names on a daytrading basis it’s not a good sign. So there are a lot of sign posts signaling extreme caution, of which I’ve only listed a few above. But of course as it is often stated the most furious rallies come within the context of selloffs – but we still appear to be in the spot where everyone wants to catch said bounce rather than “puke up” stocks.
Apple (AAPL) had some positive news on iPad sales this morning which lifted it from a negative premarket to up over 1%. Frankly this is one oversold stock – it is amazing to watch it fall without a bid to be found, just as it was amazing to watch such a mega market cap stock rally without almost any selling late this winter and a few months ago. The stock bounced on its first touch of the 200 day moving average, but immediately traded back to it – and on the second touch was not as fortunate. Indeed when it sliced through that 200 day Friday mid afternoon – the whole market went with it. So just as with the market as a whole here, the stock can bounce and bounce sharply but this is now a broken chart that will need time to heal.
Outside of some select financials and building stocks (the “Sandy” trade) not much really held up well last week. A lot of healthcare stocks that were hideouts during this correction were especially hit hard. That’s how corrections work – they eventually get to everything.
Obviously the big event this week is the election but as long time readers know it’s basically deciding which head of the two headed monster will lead us. i.e. they are both captured interests and essentially we vote for which industry will get more favors for that 2 or 4 year cycle; that’s about all we decide! Amazingly with a 10%ish type of approval rating Congress looks to return nearly intact in terms of weighting – apparently Americans believe Congress is broken – just not their representative. Or gerrymandering has made almost all districts a moot point! But I digress – we’ll have some sort of reaction Wednesday morning but aside from some short term themes, it will mean nothing. Remember all the infrastructure and solar stocks that rallied post Obama election? How did that turn out?
Today we have ISM Non Manufacturing – there was a decent report last week on the Manufacturing side, but again – this market is rarely reacting well to good news. Just as it ignored bad news for long periods of time. As always the news is not that important, it is the reaction to the news. Other than an ECB meeting Thursday where little new is expected, and another consumer sentiment report Friday there is not much on the docket. So aside from those air pockets it would appear the market will trade on technicals. Always hanging out there is the 985th iteration of the “Spanish bailout” as well…
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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
