STTG Market Recap Oct 26, 2012

For the third straight session markets gapped up sharply to start the day before a midday selloff.  While there was a flurry of buying in the late afternoon stocks finished back near the flatline Friday as the S&P 500 fell 0.07% and the NASDAQ gained 0.06%.  While the ending results were again quiet, the action during the day was not.  In the overnight session futures dumped sharply – down around 1%.  But in the premarket someone was buying them furiously and at 8:30 AM when the third quarter initial GDP estimate was released, they jumped another few points.  So instead of opening with a big down day that could have finally created a panic / cleansing type moment in the short run, stocks opened up sharply.   It continues to be difficult to create a short term buying moment when we have continuous overnight rallying and morning gap ups that get sold.   Traders want to see a bad open that is bought to mark a potential reversal point – instead we have been seen the opposite.

Today the market moved with Apple – when it rallied off its lows early afternoon the market went with it.  That said the chart is a now a complete mess and while subject to a dead cat bounce – and a potentially strong one – the intermediate term is the worse it has been in a long time. frustrated shorts as it was down sharply in after hours yesterday (to the tune of 8% at worst) and instead opened up sharply today and was among NASDAQ’s best performers.  The company continues to be run for the very long term with CEO Jeff Bezos on a hiring spree this past quarter, and spending lots of money on infrastructure which is sapping near term profits.  But this has been the case for years and the stock stays elevated.

Travel site Expedia, which reported earnings Thursday evening was the star performer for the day.

As for the indexes we have a bit of a bear flag now forming on the S&P 500 – it has broken down and is now consolidating at lower levels.

The NASDAQ looks a lot like Apple of course although that index was so washed out coming into the week it lost quite a bit less than the S&P 500 and DJIA this week.   We continue to see oversold reading but the bounces in both the major indexes have not been self sustaining.  At some point a 3-5 day rally of magnitude should come to work off the selling pressure.

In economic news the first pass of third quarter GDP was released and it came in at 2.0% versus 1.9% expected.  Much of that was due to a big surge in federal government spending – namely on defense – but that helped ‘paint the tape’ if you will, right ahead of an election.  No coincidence I am sure.

Next week we continue the last big week of earnings from well known companies, and it will already be November – Friday will be the last employment report before the election so we are all waiting to hear from Jack Welch of course. 😉  Have a good weekend and we’ll see you Monday.


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