Daily Market Update – April 29, 2014 (Close)
Investing should be easy this week.
After all it’s an Employment Situation Report Week that also happens to have a Tuesday in it.When the morning started I thought this week may be an interesting one.
While the recent string of Tuesdays looks as if it will be getting off on a positive note, the Employment Situation Report string was broken last month by a mid-day strong reversal, but the trend still remains, as for nearly the past 2 years both the week of the report and the actual day have been significantly more likely to end up on the positive side.
What more can you ask?
Well, you could have asked for a triple digit gain or at least something close.
While this morning was looking to continue some of the very impressive rebound from yesterday’s final hour I’m not fully ready to follow those odds of history repeating itself. On the other hand, when I see a company like Coach, which has been a prisoner of history and pattern, once again take a sharp dive when reporting earnings, I am prone to wanting to follow that pattern again. That pattern has been a fairly good formula to follow, although it has required some patience before jumping in, so even that trade isn’t too likely today.
Of course, those were my thought in the morning before being adequately caffeinated. Staring at the Coach 2 year chart made it difficult to resist waiting, although sometimes it’s just best to ignore those urges.
Yesterday’s rebound really was impressive, although it’s not the first such to have occurred over the past couple of weeks. Normally, those kind of rebounds carry with them a very bullish kind of message, but those messages have become obscured and haven’t really found themselves to be accurate predictors of the market’s direction.
That direction has been equally obscure of late and market health has really been called into question as the NASDAQ, and especially the greatest of the “Momentum” stocks have come under attack.
Just as those had been sure things during their climbs higher, most every sure thing sees its time come to an end. In the case of these kind of high fliers it gets a little unnerving when the word “bubble” starts being tossed around with such great frequency.
Generally, the more that climb onto the bandwagon the more sense it makes to just walk, the bubble thing is often very prescient, because it’s just not talk, but it’s also recognition of a pattern. That is the sudden reversal of fortunes in stock moves among the faddiest of stocks and the size of those movements.
As with many stocks that see reversals, such as Coach, there’s enough of a history to suggest that shares will recover in some short time frame, or at least trade in a stable fashion at a new lower level. It’s usually not correct to refer to such stocks as value traps, because their value tends to return or be re-established.
But in the case of these high fliers, there is no such individual history. Yet people believe that when they experience large drops it’s a chance to get in at a reasonable price.
History shows that many of these don’t recover and when taken in their totality, they may be a harbinger for things to come in the broader market.
As I mentioned yesterday, this will be an interesting week.
Yesterday was an appropriate start for that kind of a week and there’s more to come as earnings start coming our way.
Stay tuned and stay patient.