A Lack of Energy and a Poor Response to Earnings Makes for Difficult Trading

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Stocks traded mixed on Tuesday as speculative small-caps quickly lost momentum, and big caps trod water in front of major earnings report. It wasn’t bad action, but breadth was negative, and there was a lack of energy again. The inability of small-caps to follow through hurt bullish sentiment that was developing over the past week as some of the hardest-hit names have started to bounce back.

There some good earnings news last night from Advanced Micro (AMD) , Alphabet (GOOGL) , Microsoft (MSFT) , Pinterest (PINS) , Starbucks (SBUX) , and others, but the response was quite mixed. Google is trading sharply higher, but Microsoft, Pinterest, and others see a ‘sell the news’ reaction.

Tonight both Apple (AAPL) and Facebook (FB) report, and there is likely to be some concern that they need substantial beats to see a positive reaction.

Also, today we have the latest policy update from the Federal Open Market Committee. Concerns about inflation have lifted over the past month, but bonds have been under some pressure the last couple of days. They can easily become an issue again as President Biden rolls out several huge new spending bills in his speech tonight. Talk about increased capital gains and corporate taxes is unlikely to help the mood either.

It is a very mixed bag of action with quite a few cross-currents which is making for difficult trading right now. The inability of small-caps to follow through on Tuesday is a concern. They need to find some support fairly fast and avoid a retest of recent lows. It will be another week or so before more of the secondary stocks start to report earnings, but if they can hold here, then the technical setup will be good.

My game plan is to keep hunting for some pockets of momentum. That is what we are missing right now. There is not much follow-through, and even when stocks do seem to find support, they cannot manage a sustained bounce.

This is not an easy market right now, but the opportunities will eventually appear if we keep slogging away.

(AMD, GOOGL, MSFT, SBUX, AAPL, and FB are holdings in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

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