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Immediate selling pressure hit the market Friday morning after a gap-up open, but it relented as the day progressed and breadth stayed positive.
Nonetheless, it was still a disappointing day as market players wondered what it is going to take to generate some real momentum if blow-out reports from leading companies such as Amazon (AMZN) , Intel (INTC) and Microsoft (MSFT) can’t do it. What was particularly surprising about the weak response to the good numbers was that the news was not strongly anticipated and these stocks had not run up in front of the earnings releases.
So far this quarter earnings season has been a dud. The numbers have actually been quite good, but the price action has been pathetic and the charts continue to look troubled.
While, some of the softness this week was also caused by concerns about higher interest rates, the upward pressure eased the last couple of days. This is likely to be a continuing theme in the weeks ahead and we will have to watch for a response if the 10-year Treasury bond revisits the 3% level.
The big issue next week is going to be Apple (AAPL) , which reports earnings on Tuesday night. Much of the pressure on the technology sector is being caused by slowing demand for smartphones. Apple’s guidance is going to be particularly interesting. For that reason, Apple bulls will be focused on announcements about a capital return program.
Overall this is not a healthy market. The charts of the indices are weak, the response to earnings has been poor, there is no quality leadership, seasonality is turning negative and the stock-picking is very challenging.
The best course of action is to accept the fact that this is not a bull market and focus on protecting capital until conditions change.
Have a great weekend. I’ll see you on Monday.
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