Dollar trips up reverses to close near the lows of the day helping stocks turn intraday
The real story was the after-hours action in CSCO after it reported earnings. Intraday stocks found support as the dollar reversed and closed lower on the day. Volume came in under Tuesday’s levels as institutions weren’t buying hand over fist as stocks made their comeback. At the close CSCO reported earnings and disappointed the street. Traders took the stock down more than 12% as the after-hours session. It is tough to glean too much from an after-hours session as we have witnessed stocks like AMZN rebound in the following session. Today’s rebound was a positive signal the market was able to find support, but tomorrow will be important to see support come back into the market.
Again, the NASDAQ only has one day of distribution at this point and while this does not guarantee we do not see a pullback. However, it gives an indication of whether or not institutions are dumping stock. A concentration of distribution is certainly a big warning flag and we’ll have to be aware of any situations where we see distribution piling up. Another warning sign would be the market stalling where we see a new high on big volume only to see the market reverse and close lower. At some point these signs will show up, but for now we do not have the warning flags.
CSCO is certainly a disappointment to the market, but CSCO isn’t a market leader. Much like MSFT, CSCO accounts for a large portion of the NASDAQ and will push the market lower initially. There are plenty of market leaders holding up and acting in normal fashion. Whatever the market wanted to hear from CSCO it certainly didn’t like what CSCO had to say and tomorrow’s action will determine if buyers are willing to step up. CSCO isn’t a stock we want to be a part of.
Tomorrow we’ll get the AAII Investor Sentiment survey. Last week Bulls did drop, but only by three percentages points. Bears did jump quite a bit by eight percentage points, but still below 30%. Sentiment is a tough indicator to gauge, but running at such a high level over the past few weeks we may need to see the market digest its gains to dampen the expectations of the crowd. While not euphoric, sentiment has been quite high for a while.
It all boils down to the market leaders and the price/volume action of the market. Remember to cut your losses short and stick with your winners.
