Optimism Beats Negative Earnings Reports

When the market rallies on bad news, that tells us expectations are too low and sentiment too negative. That is exactly what we saw today. All the major earnings reports were disappointing, but the market shrugged it off and rallied steadily all day. Breadth was 2 to 1 positive, and volume was heavy; that adds some weight to the move.

Under the surface, the leadership was once again in financials. A sharp drop in oil triggered a bit surge in airlines, truckers and other transports, and we also had some positive action in retailers, restaurants and various medical-related stocks.

On the downside, energy, agriculture and commodity-related stocks were crushed, but hope that oil prices will continue to fall is what really sparked the buying today. If you were still holding on to these sectors that have led for most of the year, you felt some pain today.

If you aren't shifting quickly to the leading sectors at just the right time, you are going to lag this market. There is obviously some good trading out there, but it's not easy and it requires very short time frames.

The bulls have the opportunity now to prove they are for real with some follow-through instead of this choppy sector shifting. The market is still badly broken, but the bulls are trying to get a better countertrend going, and they have a few positives going for them. In addition, we have a lot of earnings reports coming up to add some excitement to the mix.

Have a good evening. I'll see you tomorrow.

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James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.