There was a tale of two tapes with the Dow Jones Industrial average moving lower on earnings while the NASDAQ exerts leadership. Early gains were hung onto by the NASDAQ, but the S&P 500 and Dow were unable to hang onto the gains set forth by early morning futures. Earnings were a bit detractor for the Dow as DD and TRV sunk after reporting disappointing earnings. Merger and Acquisition activity helped out the NASDAQ as well as cyber security stocks. However, we still cannot find enough muster to follow-through on gains. Volume was higher today, but institutions were not willing to push this market back into new high territory. We still remain in limbo and continue to wait for some follow-through from this market.
Perhaps a negative for this market is twofold. On one hand earnings expectations continue to fall alongside the decay of economic data. As the fundamental picture is bleak the technical picture is neutral. The NASDAQ does have a high level of distribution. While normally this would be a big warning signal the NASDAQ is on the verge of a new high. Typically, when you have a high level of distribution and the market is about to roll over you are not near a new high. The technical picture of this market is on the positive side for higher prices. It is not a guarantee we push higher, but certainly odds are favoring a push into new high territory.
Cyber-security stocks like CUDA, PANW, CYBR, and FEYE pushed higher today. It is no secret many are spending to beef up their firm’s security systems. Hackers have proved their ability to penetrate even the largest of companies. Sony is a famous breach and it is in the best interests of all companies to protect their number one asset: their information. These stocks are poised to continue to push higher and they have the wind at their backs.
We can make all the fundamental arguments as to why this market cannot proceed higher. However, as long as there is buying power and the technical picture remains intact this market can continue to ward off a correction. There are so many looking for a correction it is like a watched pot that will not boil. Sure, creative and thoughtful arguments can be compelling. In reality it is price that pays and if the prevailing trend is positive all the great fundamental arguments are worthless. Ignore the noise and focus on price.
Execute the plan. Cut your losses short and ride your winners.
