As has so often been the case with this market for many months, we managed a strong end-of-the-day bounce that made a poor day look much better. Early in the day, we were in free fall, but we found some support late in the morning and inched up slowly the rest of the day.
There was some strength in the odd couple of regional banks and restaurants, but overall breadth was poor and the volume heavy. The dollar hit a multimonth high, which really put some pressure on oil, gold and commodity stocks. Also, China stocks struggled on tightening by the China central bank.
We now have had a pattern of down big, up big and back down big again, which is a sign that market players are feeling confused and uncertain. The fact that it has occurred on good earnings news and positive political news makes it even more worrisome.
Tomorrow morning, we have earnings from GS, which is going to be a very good test of this market. Goldman has beaten by an average of $1.35 or so over the past three quarters, so expectations are probably still fairly high. On the other hand, since Goldman is such a juicy political target now, it may be in the firm's interest if it doesn't shoot out the lights with a great report. The market reaction to that report should be quite interesting.....
We have EBAY coming up this evening, but GOOG tomorrow night will be the main attraction. Google has been acting poorly for a while, so maybe some bad news has already been priced in there. It is the other end of the spectrum from INTC and IBM, both of which ran up strongly into good reports and then sold off.
Technically, the big picture is looking more dangerous. We took out last Friday's lows this morning and then bounced back, but the sellers are becoming more vigorous and we still have a setup that is very vulnerable to a sell-the-news reaction to earnings reports......
long GOOG, GS
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