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| Today's Commentary (Short Term Outlook) |
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Good start for earnings Stocks were mostly flat, but mixed yesterday as the Dow closed down a handful of points, while the S&P 500 and Nasdaq closed modestly higher. The C and S funds were up, and the I-fund closed down. Bonds rallied as the F-fund picked up 0.34%. I guess the big news going forward is that Alcoa kicked off earnings season announcing better than expected numbers and, as of this writing on Wednesday night, the S&P 500 futures are up almost 1% on the news. So, unless something happens between now (Wednesday night) and 9:30 AM ET this morning, we should see a strong opening for stocks on Thursday. The S&P 500 closed higher yesterday, but was relatively quiet. Once again volume was anemic, perhaps because of the apprehension leading up to earnings season. It will be interesting to see if Alcoa's positive earnings report, which appears to be having a positive affect on stocks as of this writing, triggers a pick up in volume from investors waiting to see how the earnings turn out.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk As I mentioned yesterday, after Monday and Tuesday's strong rally, I would be more inclined to sell any more large gains this week, particularly if volume is very high. A high volume rally could be a capitulation from the bears, as I put it, as they "give up" on waiting for a pull back, and decide to buy at any cost out of fear of missing more upside action. That is the sentiment that triggers big rallies, but it usually indicates that a peak is potentially near. If the market continues to move up on lighter volume, I think the grind higher could continue. The put / call ratios are giving us a bit of a mixed picture. The dumb money of the CBOE and Equity put / call ratios have been getting more bearish lately, as the 10-day moving average (MA) of the CBOE ratio is closing in on one of the most bearish readings of the year (which should be bullish for stocks). The last time it got this low was at the early July low. The 10-day MA of the Equity put / call ratio has also come down sharply, but is well of the low it made back in July. They are not quite as bearish as the CBOE options traders. This is a little less bearish for stocks going forward.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The smart money options traders, the OEX put / call ratio, remain as bearish as they have been all year. This is usually a bearish sign for stocks. Just a reminder: When the dumb money is very bullish, it tends to be bearish for stocks going forward. When the dumb money is very bearish, it tends to be bullish for stocks going forward. When the smart money is very bullish, it tends to be bullish for stocks going forward. When the smart money is very bearish, it tends to be bearish for stocks going forward
So, stocks are poised to open higher this
morning, based on the overnight futures trading. Let's see how this
plays out, and I will be particularly looking at volume. If we get a
gap open higher, don't forget that they tend to get filled more often than
not - sometimes intraday, which I'd prefer. |