Earnings continue to pour in this morning was not a pretty sight. Monday night MSFT reporting earnings disappointing the street. The stock was down more than 7% and it continued on Tuesday. Prior to the market open CAT missed and missed badly sending the stock lower along with the market with it. At one point the Dow was down more than 300 points on the session. There was quite a bit of panic over two stocks weighing down the entire market. We did see the market come off the lows once again led by the Russell 2000. The small cap index has had some nice relative performance over the past few sessions in a good sign risk appetite is growing. While the overall market is showing signs of weakness moving us into a neutral position there are plenty of stocks looking healthy. We do not like to see this from the market, but when it is centered around two large stocks we can put the decline into perspective. While caution is still warranted there are still plenty of opportunities on the long side.
MSFT and CAT certainly disappointed taking massive hits today. Despite these two disappointments AAPL did not let this market down blowing the doors off its quarter. We can get into the impressive numbers, but the stock reactive positively in the after-hours session. AAPL was down 3.5% on the session as fears over disappointing iPhone sales were to blame. YHOO would not be denied as it announced it was going to sell its remaining stake in BABA. These two technology giants pushing higher will certainly help futures push higher in the morning.
Will this market be able to hang onto the gains set in the after-hours session ahead of the Fed’s policy statement is another question. Fed days are always so much fun filled with volatility, but it is how we end up is what is important. This market is in a precarious position as we continue to consolidate gains from the October low to December high. It will be important we can see some follow-through to the upside here and without it we could be looking at significant downside risk. We are not there yet, but it is important for this market to push higher. A question is will it be the Federal Reserve providing the catalyst to push higher.
While today’s action on the outside looks a bit negative on the inside it was not that bad. We did not have too many sell signals and for a day like today we would expect at least a few more. We still remain near fully invested with our exit strategy in place. Wherever this market decides to head we have a plan of attack and will execute.
Enjoy the fireworks tomorrow!
