Morning Market Thoughts
Good morning. Futures are down a bit this morning as traders continue in their quest to understand exactly what Janet Yellen is really thinking. It’s a moving target. That’s all.But as I look at pre-market news, the most significant thing is the higher than expected revenue numbers coming out of Wal-Mart (WMT). Management did express some disappointment about the sluggish growth (7%) of it’s e-commerce business (likely due to Amazon). WMT needs people who are buying stuff on their computers to navigate to walmart.com rather than amazon.com. And it’s tough to get people to change online habits. But the stock is up almost 8% this morning.
Dick’s Sporting Goods (DKS) also beat earnings expectations, and that stock is up in pre-market trading.
Look for the retail sector to rebound this morning as traders start buying the dip after this upbeat news. I mentioned in last night’s video that L Brands (LB) was likely to snap back this morning after falling another 6% in reaction to disappointing earnings and lowered forward guidance. At some point, the selling has to stop…and this poor earnings number is probably just the catalyst for the final puke by bulls who have been suffering more and more pain with each passing day — and with each red candlestick on the chart. If you are a nimble trader, watch for this rebound. It may happen fast, and your reliable trigger is that the stock is trading higher than the opening print. When buyers become more aggressive than sellers, the price rises. When they aren’t, the price falls. Very simple, really. But sometimes our brains get in the way and we see what we want to see rather than what is actually there.
Look, this market is really at an inflection point. The longer it consolidates at these levels, the more likely it is to be forming a base from which it can move higher. So 2,040 is an important level. But the market is quite confusing right now. If you are a bit confused, congratulations! You have a grasp of what’s going on. I challenge you to adjust your mindset. Fewer stocks are working. And that should mean that you have fewer stocks in your portfolio.
Again….FEWER stocks in your portfolio.
You should be spending more of your time doing research and investing in your own education via reading books, reviewing a trading course, getting a new one (I have a few that might be of interest: 59-Minute Trader, Short Selling, options, etc). But in a difficult trading environment where your profits tend to be low, and your losses tend to be more frequent, it pays to focus on yourself and improving your game. Get yourself to a new level so that you can take advantage of opportunities when they arise.
I always say that “cash is a position”. You should also view yourself as an investment — the more experience, knowledge, and DISCIPLINE you develop, the higher the yield on your investment. That’s a fact.
See you in the forum.
–Dan
Market Update