The broad market indexes reverted back to the intraday volatility as investors attempt to look forward in anticipation of earnings season. If the moves intraday were any indication we may see a choppy start to the earnings announcements. Of course with banks and technology kicking off the season there are more unknowns than positive outlooks. The technology stocks have spent the last six weeks seeing prices adjusted as some believe the earnings in the growth sector will cool. Banks on the other hand continue to fight with one hand tied behind their back and the other in a sling. The lawsuits, regulations and overall bashing of the sector continues to keep any real growth sided lined for now. Some positive news in either or both sectors would go a long way to help the them going forward to regain the positive uptrend.
Last Thursday we started lower and the got an intraday reversal that followed through on Friday with a positive up day. Monday rested with some sideways to down activity, but the hope is still alive for the bounce to resume. Some are pointing to the last test lower in August and then the reversal off the lows and resumption of the uptrend as a example of what to expect this time as well. Both moved down similar amounts of about 3.5% and both having intraday reversal and positive upside momentum off the move. If the S&P 500 index is going to get back to the 2010 level we will need the mid and large cap stocks to take on some leadership going forward. That did not happen today as both lagged on the move off the lows.
The previous leaders of biotech, technology, energy and consumer services continue to struggle and have not resumed that upward trek that will be needed to if the broader indexes are to recover there respective uptrends. For now that gives the sellers the upper hand and leaves us cautious as we move forward. We have some short positions as well as long positions currently in our portfolio. While that sound crazy it does have the logic of which sectors have momentum and which are lagging. Too soon to call in the process and for that reason we remain diligent at managing our risk and continuing to take what the market gives without assuming anything.
Tomorrow promises to keep it interesting as the market has little economic data to trade on, the FOMC minutes release on Wednesday should be a good read, but not much help on the upside of stocks. Wednesday will also start the earnings reports with Alcoa kicking it off. The real push will begin next week as the start in earnest. It is likely to be choppy with the market left to trade with any catalyst from data… but there is always the news and events to drive speculation. Be patient and take it one day at a time without speculating or over trading your money. Keep it as simple as possible for now.