It is a phrase all too often heard by bulls and bears alike. It is also a phrase that negates anything said before it. The volleys hit by both sides would make Wimbledon fans stand and cheer. For every action, true to Newtonian physics, every action has an equal and opposite reaction.
Bulls: The Fed has cut interest rates 10 times and those will take hold any day now. Don't fight the Fed. Go long
Bears: Yeah, but earnings are terrible and maybe going to get worse. Go short
Bulls: Yeah, but the market always looks ahead 6-9 months across the valley and sees better times ahead next quarter. Go long
Bears: Yeah, but you guys have been saying that for the last 20 months and been wrong. Why should we believe you now? Go short.
Bulls: Yeah, but management tells us across many sectors that they think orders have bottomed and should rebound in the first half of next year. Go long.
Bears: Yeah, but stocks are already overvalued - even by next years earnings estimates. Go short.
Bulls: Yeah, but momentum is on the side of the bulls. Every time markets dip, buyers come in to spend that cash on the sidelines. Go long.
Bears: Yeah, but all market indicators are overbought at resistance telling us this market is poised for a fall. Go short.
Bulls: Yeah, but markets broke out over resistance today on substantial volume. Go long.
Bears: Yeah, but some indexes hit their 50% retracement values. Go short.
Bulls: Yeah, but markets have historically risen in the periods from November through April. Go long.
Bears: Yeah, but his looks just like April-May earlier this year. Go short.
And the "yeah, but" battle rages on. Unfortunately, I have no magic wand to wave in hopes that I can fix it one way or the other. That said, all we can do is trade from day to day. This is not a time to be placing long-term bets on a permanent bullish rebound. Nor is it a time to load up for MOPO. Though I personally believe the bears have the logic correct, there will always be bull market moves within a general bear market like we have now. Just look at the period of time between 1966-1974 (or for real veterans, 1930-1936).
When I hear the first analyst turning tail on stocks and claiming we're in a "Depression" (obviously because HE's been laid off, not the 1 mln workers that came before him), that is when I will become a buy and hold investor again. We are not there yet.
But as we have noted here in the past, it does not mean we can't trade!
So just what became tradable news today? A ton of stuff. I will hit a few highlights and then we can move on to the charts.
1. Taliban is on a run straight out of Kabul and into its collective caves - a battlefield victory, yes; but not nearly yet a win in the War on Terrorism. That was a big positive factor in today's gains. Clean-shaven men and un-veiled women are now free to dance in the streets (all three verboten under Taliban rule), and they did just that today.
2. The Wall Street Journal reported on the American Airlines crash yesterday and suggests birds were inhaled by the planes engines. However, the NTSB says there is no evidence of inhaled birds, but adds that there is no evidence yet to suggest that that terrorism played a role either. Another sigh of relief for Wall Street.
3. It gets better. TXN lit up the semiconductor sector today as it affirmed forward earnings and noted that it though Q3 was "the bottom" in semiconductor orders. Right or wrong, the news went over well.
4. WMT and HD, two of the largest retailers and members of the Dow Industrial average met their earnings estimates. Though both left earnings guidance intact, HD guided Q$ sales and margins upward, which juiced the price.
5. Bolstering HD's slightly encouraging guess was the chain store sales, which showed that sales were up 0.6% last month. While discount store sales were up, not widely reported was that mall sales were down substantially. Shoppers stayed away.
Not all was good news, though the "bad" news was taken in stride.
1. John Chambers at CSCO's shareholder meeting had cautious comments today. While not really a warning, they were meant to temper enthusiasm generated from the November 5th earnings announcement. "Expect extended slow growth". It put a shiver in some tech issues, but ultimately did not affect share prices that much. CSCO closed up $0.32 at $19.57 despite the pseudo-guidance.
2. Brave Sir Lawrence (Ellison) of ORCL also delivered the "not so hot" news that Q4 earnings would be at $0.09-$0.10 instead of current estimates of $0.11. ORCL closed down $0.88 at $14.51 and kept a lid on irrational exuberance that seemed common among many issues today.
3. Did I mention weekly/daily charts are overbought? Take a look.
Dow Industrial chart (INDU):
NASDAQ-100 chart (NDX):
S&P 500 chart (SPX):
Notice any similarities above on all three charts? If you see overbought stochastics on the weekly/daily chart with candles bumping into overhead resistance, which typically presages a selloff, give yourself half a star. (Yeah, but) if you also see a breakout over the 50% retracement bracket and points of previous resistance with a close near the high of the day, give yourself another half star! However (yeah, but again), a gap open never signifies that a move is for real. More often than not, gaps get filled, which suggests more downside to come.
What's it all mean and what can we expect tomorrow? Wish I had the answer. But I do know this. The VIX has inched to its lowest close at 28.63 since September 4th's 28.55 close. Only then fear was on the rise. It is waning now and may move down further, which could keep stochastics in overbought for some time with stock prices moving up. On the other hand (yeah, but), oscillators are overbought and itching to crack downward.
I also know that market bottoms rarely happen when anyone expects them to. Since nearly every bull in town thinks we've been there already and that this is a resumption of the good old days of bull, I would suggest we have not seen the lows yet. The markets do not agree with me though. While I am gradually losing my conviction for an immediate MOPO, I think there are still good put opportunities based on stochastics, however, bullish momentum cannot be ignored. That can also produce some nice gains and has over the last nearly two months.
The point here is that for every point, there is a counterpoint of equal validity. For every bear, there are more bulls to keep prices rising for now. Yet, there is no clear direction for the market from here. How long that lasts remains to be seen. Picking a direction right now is dangerous. As Austin has aptly pointed out in the Market Pulse, there are higher odds of loss from holding overnight. This market is currently best suited for daytraders or stay-outers.
Higher than average volume on the NYSE and NASDAQ with markets finishing near their daily highs suggests to me that bulls still have the upper hand though that will not be without pullbacks along the way, which have been, and until proven otherwise, should remain buyable. Just be sure to use discipline with stops in case we are wrong. Trade with major caution and don't hold overnight unless doing so with small amounts of risk capital. Keep dry powder for when the trades become more obvious.
See you at the bell.