Daily Market Update – April 23, 2014 (10:00 AM)
While this morning looks to be a repeat of yesterday morning’s pre-open market, I’m reminded that yesterday was another in a string of days that the overall tone of the market doesn’t necessarily follow what goes on before the opening bell rings.
It looks to be another quiet trading day, but what can’t be lost is the size of some of the earnings related moves that are appearing, both good and bad.
On the downside there were large moves in Lexmark, Cree and VMWare, while Netflix, YUM and others had strong gains.
That bothers me, a little, that the risk may be accentuated even as the market itself doesn’t appear to have elevated risk.
The key is that the market may not “appear” to have that risk. But since the market is nothing more than the sum of its component pieces, the more tenuous those pieces the greater the likelihood of weakness undoing some kind of foundation.
Many markets see their undoing come first with the same kind of exaggerated weakness shown in those stocks that had earlier showed exaggerated strength. We just recently went through a very short phase of seeing “Momentum” stocks under attack and a very strong drop in the NASDAQ.
The key here is that it was very short lived. The question is whether the drop was just a teaser for things to come. While seeing corrections is thought to be healthy for markets and consolidation is thought to be healthy for stocks, no one wants to be the only healthy one in the room. Owning shares of a stock undergoing price correction while everything else around you is going higher usually leads to more selling of an already down position.
That additional selling is one of those things that spooks markets, even though it may really be only germane to an individual stock or sector, such as biotechnology, or type of stock, such as “Momentum.”
The earnings releases from some of the more key components of the DJIA and S&P 500 haven’t been stellar, thus far, yet the market hasn’t reacted in any adverse way. Perhaps the key has been an abiding confidence that the Federal Reserve is still there to see to it that markets have some underpinning. What surprises me a little is that forward guidance hasn’t been reflecting any kind of optimism that might be expected in a growing economy.
While that has hurt those stocks the cynics will believe that companies are just setting themselves up for an “over-deliver” situation at the next quarter, but companies don’t seem to look that far in advance anymore.
With no really important economic news this week all you can do is speculate as to what these earnings mean.
For now, at mid-week, and this being another slow week, I still don’t mind watching the bottom line grow, but I would much prefer to be an active participant.
I don’t know how many new opportunities may be identified during the rest of the week, but I’m not expecting much to happen, mostly hoping for some assignments to end the week and maybe using all of this unused time to start some kind of hobby.