Stocks Rebound From Friday’s Sell-off

Earnings season is now in full swing and the market rebounded today.  It is quite common for the market to have a natural reaction to heavy volume selling and today wasn’t a surprise.  Early in the session sellers took over shortly after the opening sending stocks much lower.  Volume lagged Friday’s option expiry pace, but the market did find its footing.  The day resembled Thursday’s action as the market moved higher volume really didn’t jump.  Buyers didn’t come out with vigor, but with more timidness.  At the close we saw the market close just off the close awaiting earnings reports.

Ignoring the earnings reports and the reactions to them in after-hours trading today wasn’t a positive day.  One glaring issue was the inability of the NASDAQ to clear 2200 which has acted as resistance in the past.  We briefly saw the index get above this level but was unable to sustain it going into the close.  Additionally, there weren’t too many big volume moves to the upside to show some strength.  The lack of strength in volume and leading stocks shows we can continue lower.  Even the tracking ETFs couldn’t muster even the slightest bit of volume.  Without strength this market will find it difficult to rebound just yet.

In after-hours trading there were quite a few disappoints.  Most notably is IBM missing revenues and the market not taking well to the news.  One might think if INTC had great earnings and saw a sell-off after gaping up perhaps the opposite may be true.  Not so, Google was hit hard after-hours and continued the trend on Friday.  IBM is not a leading stock, but is a large cap technology stock that has been leading since the July first bounce. In addition, another former leader that has broken down broke down further in after-hours.  Atheros Communications dropped almost seven percent this afternoon after reporting earnings.  Highlighting being long here is a risky endeavor.

Looking ahead to tomorrow will be earnings reports as well as housing data.  Housing starts and building permits are to report tomorrow and the market will certainly react to the news.  If you take a look at HOV KBH you can see the market certainly doesn’t believe the housing market is about to make a turn here any time soon. Trying to anticipate earnings will only get you in trouble and will only lead you to churn your account lower.  If you want to gamble go to Vegas, but in the stock market you need to put the odds in your favor.

Cash continues to be king in this environment and until we see power to the upside it will remain king.