The primary market theme this earnings season continues to be "sell the news." Even though a number of individual stocks like AAPL, GOOG and AMZN have traded strongly on their reports, the overall market keeps selling into the giddy reaction to good news.
The good news for the bulls is that despite this sell-the-news inclination, the major indices have not suffered too much technical damage. A big part of the reason is that the best reports have come from the most heavily weighted stocks in the indices such as MSFT and Apple. If you look at the iShares Russell 2000 ETF small-cap index, on the other hand, you will see much weaker technical action, because it hasn't benefited from the big-cap technology names that have been supporting the market during earnings season.
Most of the major earnings reports are now out, so we have to think about what will be the next market catalyst. Logically, if we can't rally more on the good news of some great reports, then the risk to the downside will be greater when there is no earnings news.
Another very important theme lately has been the weak-dollar/strong-commodity trade. The market has been saved numerous times lately by weakness in the dollar, which causes oil and commodities to rise. Should the dollar reverse to the upside, it will be a very convenient excuse for some aggressive profit-taking.
Technically the S&P 500 is right around key support at 1075, which is the September high, and it has done nothing more than to suffer a little healthy consolidation. Conditions are in place for it to evolve into something more, but anticipating weakness in this market has been a death wish.
We had a weak finish today, which is also a bit of a change in character. The bears have had little success in gaining traction when conditions favor them, but we'll have to be on guard that this time it may be different.......