Thursday, October 24, 2013

Hoping For A Pullback

Markets fell yesterday on mixed volume.  Trading on the Nasdaq was slightly higher, showing mild distribution.  This morning markets are bouncing and hovering right near recent highs.  It would make sense that stocks have become overbought and need a little rest period.  But trading for most of this year hasn't made "sense", at least in the traditional way.

Earnings reports continue to roll in fast and furious.  Looking at the reactions in stocks today reveals more of a mixed bag and no real trend.

Stocks rising on earnings: MMM, F, PHM, ESI, MDSO, RCL, ABB, ALK, NOW

Stocks falling on earnings: AKAM, CS, FFIV, ORLY, UA, BEN, AVT, RYN, LSTR, MJN, TROW, ZMH, TQNT

In econ news, initial jobless claims rose for the week to 350k, but the BLS said that Calif. is still working through backlogs from September.

Asian markets ended mixed.  China declined despite the HSBC PMI reading climbing to 50.9 from 50.2.  The liquidity crunch continued in China with overnight SHIBOR rates rising again.  The overnight rate rose to 4.09%. 

Europe's markets are mostly higher today.  Eurozone manuf. PMI ticked up to 51.3 from 51.1.  And the services PMI fell to 50.9 from 52.2.  French manuf PMI slipped to 49.4, marking its 20th consecutive contraction.

Commodities are mixed again.  Gold prices are higher to $1344 while oil prices are lower near $96.15.  A gas expert was on CNBC this morning predicting lower prices at the pump, which should boost consumer confidence into the holiday season.

The 10-year yield is sitting right at the 2.50% level.  Goldman Sachs said they think the Fed likely won't start tapering until March 2014.  As such, the upward pressure on bond yields seems to have subsided for the time being.

Trading comment: No changes to recent comments on our strategy.  We don't want to chase stocks higher that have had big run recently.  Our favorite strategy is to buy stocks that just reported strong quarters but the stocks have pulled back.  Or least favorite strategy is to bottom pick stocks that have show big declines on the heels of disappointing earnings.  Those stocks are likely to remain laggards until they can put up some better quarters.


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