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Is This the Best the Markets Can Do?

NEW YORK (TheStreet) -- The stock market's performance Thursday was not what the bulls wanted to see.

With the Apple (AAPL - Get Report) earnings on Wednesday and the announcement of a stock split, coupled with the Facebook (FB - Get Report) earnings, the bulls had everything going for them. And what did they do with all that momentum? They fell flat on their faces.

The DJIA was totally flat, 0, at the close, 16501.65. The S&P 500 closed at 1878.61, up 3.22 points. The Nasdaq closed up a disappointing 21.37 points at 4148.33 and the Russell 2000 closed  at 1144.35, down 2.73 points.

The big winner on Thursday was AAPL. With the announcement of a stock split and decent earnings after the close of trading on Wednesday, it closed at $567.77, up 43 points or 8.2%. The big disappointment in trading on Thursday was FB at $60.87, down 0.49 or 0.8% after posting what were very good earnings numbers after the close on Wednesday.

From a trading perspective, I need to put the FB disappointment in proper perspective. Traders need to understand that FB went into earnings Trend Bearish. That means for a three-month or longer time frame the price action in FB is bearish. In addition, FB was in overbought territory, according to my internal algorithm process.

I have frequently mentioned that traders need a risk management process that works. Traders and investors alike need to know where companies are in relation to their overbought and oversold levels. It matters and keeps many traders out of trouble.

AAPL, on the other hand, entered trading on Thursday with a middle-of-the-road algorithm number. AAPL was neither overbought nor oversold. That middle algorithm number allowed the earnings and news to propel it higher on Thursday.

The stock market, in general, will enter overbought territory on Friday if the markets open to the upside. This will set the markets up for a selloff next week.

Volume was once again on the light side Thursday. The S&P 500 Trust ETF (SPY), had volume of 83.4 million shares. That was one of the lowest volume days in 2014. If the markets cannot generate better volume with the news that FB and AAPL provided, the markets have a serious problem. If market prices are up and volume is down along with increasing volatility, that is not a bullish sign.

Traders and investors need to prepare themselves for lower prices ahead. Netflix (NFLX) set the tone this week when the earnings were fantastic and the stock had a huge move to the upside. It has since given all those gains back and then some. Not a bullish sign of things to come.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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SYM TRADE IT LAST %CHG
AAPL $113.29 0.00%
FB $91.01 0.00%
GOOG $630.38 0.00%
TSLA $248.48 0.00%
YHOO $33.14 0.00%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

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