Post-Earnings Correction?


Editor's Note:

Investors are choosing to sell the earnings news following the early January rise in stocks. It's a logical place to take profits after a company reports earnings. It doesn't matter whether the news is good or bad. Momentum traders like to exit and move into the next momentum candidate.

I am still concerned that the market could see a late-January correction. That's not a bad thing. A significant pull back can be used as a new entry point. However, that means we need to wait for that entry point. Now does not seem to be the best time to launch new long-term trades in stocks.

As I scroll through the sector indices most of them look overbought and way overdue for a pull back. Right now I would watch the oil stocks. They could candidates on a correction. I'd also keep my eye on technology and the banks.

We've got two more weeks of really heavy earnings announcements. Afterwards investors will return their focus toward economic data as earnings reports start to slow down.