Morning Market Thoughts
Good morning. The futures are higher this morning, which should be expected after yesterday.1. The S&P 500 was testing the 100-day moving average and rebounded into the close. I typically don’t look at the 100-day moving average, but since the various indices ($SPX, $DJI, $DJT, $MDY, $IWM, $NDX and $COMPQX) have been all over the place relative to their positions in the last 6-8 months of trading, I’ve expanded my moving averages to get a sense of which indexes (and sectors) are strong relative to the others. But the S&P rebounded off the 100-day MA; the Dow-30 rebounded off the 50-day moving average, and the Nasdaq 100 closed below the 50-day moving average for the 3rd consecutive day on declining volume. It is now back above that key moving average in pre-market trading.
2. So, the broad market is set up for a technical bounce. And in all cases, that bounce takes stocks right back into the high-supply areas where sellers live.
3. Chinese stocks are a mixed bag this morning. Momo (MOMO) is down more than 10% this morning after reporting earnings that were actually pretty good. Earnings were $142 million for the first half of 2017, compared to just $22.5 million for the same period last year. Revenue increased to $60.8 million in the second quarter versus $15.4 million from the second quarter last year. So the revenue/earnings growth is extremely strong. The stock initially traded higher in premarket trading. But the first move is usually wrong. (This is true. Check it out — in after-hours trading, the number of times a stock jumps in one direction on the headline, and then reverses once words are actually read by humans rather than machines is actually quite impressive.) So the stock is now lower. Might this be a setup for an oversold/59-minute trade this morning? Perhaps. But stocks that have gapped down have typically taken a while to rebuild their bases. So if you happen to be buying MOMO this morning, you should have a clear plan in mind, including timeframe. (As noted in last night’s Strategy Session, I do not hold a position in MOMO though I was looking for a breakout. But the market has been very user-unfriendly lately and I am sticking with my guidelines of not holding stocks over earnings. It’s just too much like gambling (without even being able to see the dealer’s top card).
4. The solar eclipse came and went and nobody died. I’m sure there will be plenty of folks running to their local optometrist over the next week or so wondering why that can’t see very well. But hey, they saw the moon move in front of the sun, which was a historical event. (I saw a picture on the interweb last night…and that was pretty cool. I had my special glasses on while I was checking it out — my reading glasses).
So we’re going to open higher this morning. I would use the strength to be reconsidering any positions you might have that you are starting to wish you didn’t have. If you can sell some into strength, it’s probably not a bad idea. We really aren’t likely to break out to the upside any time soon.
By the way, it isn’t a bad idea to keep tabs on our aerospace and defense stocks after last night’s address to the nation by POTUS. (res ipsa loquitur)
See you in the forum.
–DAN
P.S.: Jim, if you got this far, text me and let me know. (This is an inside joke).
Market Update