Stocks Do Not Waste Time
- Stocks were due a test at some point and decided to take it Tuesday and perhaps a bit more.
- Off again EU meeting casts doubts on the likelihood of the ‘real deal’ or a deal of substance.
- Earnings are very good and very disappointing.
- Case/Shiller up month over month again and slows its decline, but authors say it is all the same thing.
- Consumer Confidence reaches atrocious levels as retailers report great earnings and solid guidance.
- Richmond PMI logs another negative month.
- Indices testing the breakout in one move and now looking for a reason to resume the upside break. After hours earnings are bitter and sweet . .
Stocks don’t waste time, test the breakout all in one move.After breaking through the top of the August to October range, stocks were due a test. They took that test, and they decided to do it all in one session. SP500 fell back to 1229 on the close, and that is just a gnat’s rear end above the 1227 November 10th close. That is the point that marked the top of the August to October range. There was the breakout. There was the tap at the March 2011 lows and an immediate turn back down. The day was not always a straight down test. Stocks had their issues early on, and that was after a modestly positive open. They sold off into the first hour and then actually rebounded into lunch. Then they chopped around through the early afternoon session.
The SP futures were holding a support range. Looking at the SP500, it formed nicely at the 1235 level. It moved laterally most of the session, looking good. It started to bounce into the last hour. But as the last hour got underway, that was the end of that bounce. Worse than that, stocks rolled over and sold hard into the close. They sold to session lows. They toyed with them, and it looked like they were going to bounce off that interim level, but that was not the case. There were a lot of stories affecting the issue. At the end of the day, what was pinned on the last-hour decline was the worry that a substantive European deal would not be reached on Wednesday. Thus stocks were beaten about the head and shoulders in the last hour. There were some impressive declines at the end of the day.
NASDAQ, -2.2%; SP500, -2%; Dow, -1.74; SP600, -3%; SOX, -1.9%.
Some fairly serious declines. We wanted just a test. We got the test, but it was all in one day. That is not necessarily the best action on the session or the rally, for that matter. You like to see a relatively nice, easy test. A lot of the stocks that broke to the upside over the past few days made a test of the move. We bought into some of those on the breakout with the idea that they were posting very solid bases and they were good breaks to the upside. They were, but then the tests came. Now they are back to where they started from, and we will see if they can hold and resume the move to the upside.
WEDNESDAY
There is more economic data. Durable Goods Orders are important to see. New Home Sales are at 10:00 o’clock. That will be interesting. Crude Inventories had a big impact last time on the price. It dumped afterwards, but then it rallied right back to the upside.
It will be an interesting day. We will have earnings. We also have the EU meeting. We will see if they come up with some kind of plan. Today no one was really expecting anything. That is good; those who expect nothing are never disappointed. I do not expect anything concrete out of this group. Germany does not want to go along with a big bailout. It will do anything it can to avoid that. They will not have any substance in the memorandum.
That said, what about earnings? It is one of the real drivers. After hours we have a lot of earnings, and they are all over the map. We all heard about AMZN and its disappointment as much as we heard about NFLX and its disappointment from Monday night. But there are some really great earnings out there. PNRA is selling the heck out of their bread. More than just bread every time I go in there I cannot resist one of their desert specials.
There were other solid moves after hours as well. FFIV reported, and it had a nice bump. FFIV was up 8% on some very solid guidance. IRBT sells robot cleaners, and it had a good result and gapped to the upside. It was not all roses as we saw with AMZN. BRCM was also down, and that was disappointing. That could have an impact on a lot of the networking communication tech stocks tomorrow. That is an important miss because this is the time for semiconductors and technology. If they are missing, that is not great for NASDAQ’s attempt to hold its breakout and continue to the upside.
It will be an interesting day. We have definite news drivers to bounce stocks higher or maybe not. They may not be able to. That reminds me of that line in “Stripes” with Bill Murray. I think the sergeant was saying that “One of these days maybe one of these guys will save your life.” And then Bill Murray says, ” Then again, maybe not.” But I digress. Tomorrow the market will have to either bounce or not. It decided to make the test in one day. It can come back a bit more, and that might scare people enough to then reverse and then continue the move to the upside.
There are not many who believe in this move. On Friday they were all saying it is just short covering. That is true. They were saying the same thing on Monday, and a lot of it is short covering. Now we will see if they can pass the torch. This is where the torch has to be passed, right on the test of the breakout of the August to October range. If it can hold and continue to the upside, we have some buyers and a rally in place likely through (or close to) the holidays. That is exactly what a lot of fund managers want to see. We have the wild cards out there, as usual. Europe could be a total disaster, and the market may be disappointed. Today it was getting some of that out of its system already.
Again, we will just have to see how the market holds. We have a lot of stocks in this really good base, and they are breaking to the upside. Monday was not their day. A lot of them were pushed back down, although some stocks held up very well and did not come back at all. JNPR did not come back, and RVBD did not come back either or not as much as we wanted it to. Some stocks held up just fine, and that is an indication that perhaps the market will continue up as well. We will see how it tests, and we will make our plays from there.
