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The market feels weaker than I originally thought last week. We all know that it’s been 3 ½ years since the 2009 market bottom. What’s bothering me this morning is the feeble bounce we are seeing on the NASDAQ. At the 200 day moving average you would expect to get major support over the next few days. So far we haven’t seen much new demand here. Instead we are seeing a large number of prior leaders being dressed down each day. Last week I wrote about AAPL, GOOG and LULU. This week its ALXN and NSM’s turn. When the best merchandise in the market is being taken out, what chance does the rest of the market have?
I’m struggling to come up with potential catalysts that would get this market back on track without a full correction. The strength in homebuilders and mortgage industries due to the housing recovery is probably not enough to resume a broad market uptrend. Perhaps if Apple (AAPL) is able to do something incredible and resume its uptrend, this market may follow suit. Currently it seems like AAPL is in a topping process. I thought the same thing back in April and it was able to come out of it. But how many times can investors go back to the same well before it runs dry? Aside from AAPL, I can’t think of any other individual stocks that could potentially have a major positive impact on the market. There are also numerous mixed macro factors that make this kind of analysis more complex:
However, with everything factored in it looks we are going to go down further. As always, I defer to the charts. The charts never lie, and are always less complex than trying to make sense of the political and economic environment. Right now, the charts all look pretty poor.
President, MarketSmith Incorporated
watch alxn.its fundamentals are great.this may be one time when the technicals are greatly mistaken.
Multi -national conglomerate earnings conferences continue to produce news of CEO's concerns about slowing global growth impacting future sales . I f the market is a discounting mechamism, then the related earnings projections that will emerge in the next few weeks could add to the negative backdrop for growth stocks in the next 3 -4 quarters. The Fed reports forecasts continue to confirm a shakey economic foundation.
We don't see many climax runs in the charts but one can see a lot of extreme negative action in the individual issues that have run up the most as you noted. More to come?!
Be careful when using fundamentals to justify holding onto a stock late in a cycle. Some of the best stocks we’ve studied have topped when earnings and fundamentals were at their best. Most notably, YHOO topped in 2000, even though the prior 4 quarters of EPS growth were 450%, 500%, 600% and 375%.
It is important to remember that if ALXN’s fundamentals are truly “great” the stock will stop going down, form the right side of a base and provide us with a new place to enter the stock.
Thank you Scott for professional evaluations of the market. Knowledge, experience and the "charts" always distill the truth.
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