Crossroad...
We have to admit a 400+ reversal from a floodgate open was quite impressive today. We highlighted the importance of watching out for MBI bits and with it the potential for a " watch out upside" if the negative noise from yesterday could be broken down. Minutes later and for 3-4 hrs they provided upbeat noise of their own, until with 5 minutes left in the day a newswire bit on the insurers plummeted the DOW some 100+ points in seconds showing either the markets sensitivity or just its craziness. It's the markets resiliency to bad news (initial claims this am) that is making us think that maybe we have seen the worst. Right now, Dow is near its resistance level and Naz is not that far off. Does this mean we can bust through and start a parade? Well, first there's this thing called Google to bowl over. If it wasn't for Google's not so rosy report, we may have a chance to finish the week on a high note tomorrow given a half decent job report. At this point, things don't look so clear. Job report is of course going to be the focus of the day and it may very well set a strong tone in the early going. One thing is for sure, a disappointing job report coupled with this GOOG report can and probably will crumble this latest rally. As a matter of fact, there's no better time to turn this market around than now since it's right near its resistance level.
So how important is Google these days? We think it's still an icon for growth oriented stocks and if it says things are slowing down, there's definitely cause for concern with regard to our economy. If Google expects less advertising revenue, it simply means that ad. company are cutting back which means they believe consumers will be spending less. Somehow, everything seems to be interconnected these days and you can use all kinds of assumption to justify the status of this economy. The bottom line, aside from Google, there have been numerous earning reports so far this quarter that belong in the "disappointing" bin. There is a general consensus that things are slowing down and we just have to deal with it. Still, the reaction has been mute so far on the futures and we may see some of the AMZN type action spilling over as it too had a horrible AH's yesterday. We also maybe be seeing a rotation into new leaders to take us out of the bottom and so there is less fascination or emphasis w/ GOOG and the rest of the giant growth stocks we are used to following.
Now the game plan! If we get a good job report tomorrow, it is possible we get some very good action in the early going but we think it might be hard to sustain all day, especially on a Friday. We'd definitely be looking to lock up some profit if such a scenario plays out. If we get a bad job report tomorrow, we are likely going to wait to do some bottom fishing on some of our recent favourite longs. In this market, it definitely pays to do the opposite of the market action when it's at an extreme level. Look at today as a dismal claims number was quickly forgotten. What we mean by that is to buy the good stocks on an extreme selloff and short the crappy stocks on an extreme rally. Remember, this market is no longer a one way ride so you might as well start taking advantage of both sides of the action.
MA once again beat estimates and makes its way back here for more. Remember, it's a circus.