The Bears Get a Win...Finally

Market Action:
We’re not talking about the Chicago Bears even though they did win this week…they’ve had several wins over the season.  We’re talking about the stock bears, you know, us.  

Well, the stock market almost went according to plan, in the NASDAQ at least.  The market opened with the INTC earnings news from Tuesday evening and the December PPI on Wednesday morning, both of which were interpreted negatively, but not very negatively.  The NASDAQ 100 (NDX) opened down about 8 points or 0.5% and then rallied to positive territory briefly over the next few hours.  From there, it was down the rest of the day especially after the Fed’s beige book was released.  A bit of a rally into the close was sold off just before the close so that the NDX was near its lows of the day, down 0.80%.

The Dow fared quite a bit better but did manage to close down marking the first day in four that it failed to make a new record high.  The Dow being at record highs does seem to have no reason to sell off.  Portfolios feel much safer with big cap stocks in times of uncertainty, even though no one will admit to feeling uncertain about now.  We say this because of the deep lows the volatility index, VIX, has been trading at recently.

The beige book only exacerbated the market’s fear that the Fed can’t lower rates any time soon.  The PPI in the morning was quite strong but didn’t put much fear in the market because they knew that the beige book was going to tell them how the Fed really thought.  When it came out with positive news on the economy, the market was not in the mood to be buying stocks.

After the close Apple (AAPL) announced that their earnings blew out estimates and early on the stock jumped about five points (5%) but by the end of the after hours trading AAPL finished down about a point after being down two points during the day.  

Opinion:
The reaction in AAPL is just the kind of reaction we would expect as the market rolls over, bulls scratching their heads in disbelief that a stock could go down on such news.  As we mentioned in yesterday’s post, there is a day coming which could have been today when the market would open down and keep going.  Well, that wasn’t exactly what happened and anyone that was watching the Dow didn’t even see the decline; but, the market was persistently down this afternoon when it counted.

We don’t believe for a minute that one day can set the course for the next move but Wednesday sure had the makings of a bearish turn in the NASDAQ.  The proof will come over the next couple of weeks.

Options expiration is on Friday this week which seems to be some of the cause of this drop today.  We normally attribute some reversal action to options being unwound and since we have the Dow at record highs a reversal would mean down this week.  Again, we will watch and see.  We think things are going to get a little interesting for us bears.

Dow Industrials:  12,577.15  -5.44
VIX: 10.59
HUI:  318.21
QQQQ:  44.91
RYVNX:   15.98
RYAIX:  20.77
RYCWX:  34.87
TLT:  87.96
BEGBX:  13.53