Economic data continues to disappoint as retail sales slumped. The slump could solely be blamed on falling gasoline prices. Bank earnings were mixed with BAC beating expectations while JPM missed. Volume jumped on both exchanges as JPM and WMT provided a lot of volume. WMT warned on sales as the retail giant continues to face major headwinds. Another distribution day for the markets with the Dow leading the market lower. Today was not the sort of action we wanted to see from this market. It is why it was important to have an exit strategy for any new longs. This market will need to find a way to reverse course and erase the negative action the last two sessions.
There are two big stocks that do look like clear cut shorts. AAPL and JPM continue to act weak. AAPL does report earnings soon and it would be a bit risky shorting here. On the other hand, JPM has earnings out of the way and it does not appear buyers are willing to step in and support the stock. Let’s remember the thesis to own financials was for the Federal Reserve Bank to raise interest rates. Given the economic data and lack of inflation (government calculated) the Fed is unlikely to move rates. Instead, look for another round of QE to come about before interest rates are moved.
Another issue we continue to have is the lack of stocks setting up in bases. Stocks like AMZN, FB, NKE, and GOOGL look alright. Unfortunately, the lack of leadership is troubling and will hold this rally’s potential. All of our scans are light and it is uncommon to have light scans in a healthy new uptrend. Anything is possible.
Tomorrow we’ll get a full picture of sentiment. It will be interesting to see how the picture has unfolded after this run up. Is this market full of bulls just after a two week rally?
Stick with the plan and execute!
