The market opened lower on Tuesday as the overnight futures were down somewhat going into the session. HPQ, Hewlett Packard, decided to announce their earnings a bit early due to an error, they had inadvertently sent the news to a third party and thought they should get it to the rest of the world, too. The real earnings will be coming out next week so they’ll have a chance to move up on the news twice (oh that sarcasm). The news was pretty much in line with expectations but the stock moved up in early trading. After falling back with the broader market in the first hour, HPQ managed to rally to close slightly above where it opened, up about 2.75%.
The Dow actually traded down about 75 points in the early going but that was the low for the day. From there the rally started up again such that by the end of the day, the Dow could have closed up again but failed and ended down just 3 points.
CSCO brought its news to the market right after the closing bell and, while the news wasn’t great, it really wasn’t bad either. CSCO’s guidance for the next quarter wasn’t as strong as the company had said earlier and the stock didn’t trade well after that news. By the end of the after hours session, CSCO was down nearly 6%, pulling down the overnight NASDAQ 100 futures. We’ll see if that means anything when stocks open on Wednesday. There is that pesky little news from the Fed that everyone is concerned about.
The Fed news has caught the market’s attention and we expect that the news we get shortly after lunch will be “no change” and this will give the market cause for joy. Ok, maybe we’re a little cynical after this incredible run but we do think the market still wants to rally even though it is extremely tired and in need of a rest.
The news will not change the landscape of the market. We have seen this market go up for no reason at all and it will go down for the same reasons, just because it will. The mere fact that there has been virtually no selling for over a month, gives the market a good enough reason to trade down a little. You may think that a little drop of 75 points can take care of the current over bought condition. This is just simply not true. Anyone who wants to sell has been rewarded for not selling and those that don’t want to sell are even more complacent than ever—although our friend, the VIX, has not gone down much in this rally.
With the CSCO news now out and the Fed news coming out on Wednesday and with most of the earnings news out, there is little reason for the market to trade down this week. However, this is exactly the time that it can and probably will go down, at least a little. We hold to our contention that you should “sell in May and go away”.
[Editor’s note: We recommend a re-read of our last post, especially the real estate section.]
Dow Industrials: 13,309.07 -3.90 (really?)
QQQRS: 0.39 bid
QQQRT: 0.64 bid