It isn't often that the market has such a crazy mix of cross-currents. Big-cap technology stocks flew on GOOG earnings, while the senior indices floundered on weak financials. In addition, Ben Bernanke promoted QE II once again, which caused us to gap up, but the dollar rose and bonds fell hard. The weak dollar has been the single biggest driving force in this market since Sep. 1, but today, it didn't matter much, although the reaction seemed to indicate that the market has discounted QE II to some extent.
Breadth was negative overall, but almost even on the Nasdaq. Retail, chips and oil led, while gold and commodities struggled on the stronger dollar. There continues to be some very aggressive momentum in places, but some of the recent leadership groups, like solar energy and gold, sold off today.
The big question is whether this market can ignore the weak financials and stay focused on the strength in other sectors, or are financials the warning sign of how flimsy the economic underpinning of this market really is? The money coming out of financials and bonds had to go some place, and today, it went into GOOG, AMAN, AAPL and the like. While those stocks might seem technically extended, there just aren't any fundamental negatives there to stop the momentum.
AAPL reports earnings on Monday night, so that is going to make for a very interesting day. After the strong GOOG report, expectations will be very high, but the momentum traders are feeling extremely confident, and they will continue to push.
It is a very unusual market, and it is important to stay open-minded and flexible. The stage is set for a higher level of volatility, but this market has a tremendous amount of underlying support, and QE II will continue to prevent the bears from being too aggressive.
With a slew of earnings reports, Fed speeches and economic news coming up, it should be a very wild week.