This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

This Stock Market Has No Memory

NEW YORK (TheStreet) -- This stock market simply has no memory from day to day.

After taking a downside hit on Wednesday, following the Federal Open Market Committee meeting, the markets looked to have downside follow through on Thursday morning. After a 60 point down opening in the DJIA, the markets quickly turned around and soared higher, closing up over 100 points to 16,332.

The S&P 500  closed up 11 points at 1872, within range of a new all time high. A buy the dip, sell the rip scenario that was mentioned here on Tuesday certainly took place. The top callers in this market have certainly been premature.

A major concern on these up-days is the lack of buying volume. The volume on Thursday was lower than the sell volume on the downside on Wednesday.

What appears to be developing from a short-term perspective is adding fuel to this market, given what the Federal Reserve said on Wednesday, that traders and investors are looking for a stronger dollar and higher interest rates. Unfortunately, that was last year's playbook.

That may ultimately prove correct again, but it's too early to make that assumption. This appears to be just a technical move based on an oversold condition. We have the dollar and the 10-year bond in a bearish trend, which is a three-month or longer time frame. Until some technical levels are breached on the upside, we cannot get to bullish in our analysis.

In addition, the stock market, so far in 2014, has an inverse correlation with the dollar and interest rates. As the dollar and interest rates are falling, the stock market is rising. This is the complete opposite from 2013, when the stock market had a positive correlation with the dollar and interest rates. When the dollar and interest rates were rising last year, the stock market was rising also. This year, as the dollar and interest rates are rising, the market is falling.

What this all means at the current time is that when the stock market goes up, the dollar goes down over 80% of the time and interest rates go down over 70% of the time on a daily basis. Correlations can change at any time and they must be recognized by traders and investors to properly position themselves in this volatile market.

Again, this all has to do with the growth slowing scenario in this economy in 2014. We cannot continue to have a weak dollar and falling interest rates, and the utility and inflationary sectors, such as gold, continuing to lead the markets on the upside. That is not a recipe for a strong stock market.

What is going to become critical as this market moves forward in 2014 is the growth slowing scenario that the Federal Reserve may be missing. They have a tendency to operate on a six month lag time frame.

This stock market requires being flexible and patient in your buys this year. The market is very volatile and whippy from day to day and the buy and hold strategy just may have the most risk as we move forward.

A few large cap stocks, stocks with a market cap in excess of $4 billion, that appear to be oversold on a short term basis, are International Paper  (IP), Safeway  (SWY), Xylem  (XYL) and Facebook  (FB).  One stock that I did have a long position, that was mentioned in Tuesday's column, was Netflix  (NFLX - Get Report). I sold that stock Thursday morning for a nice profit.

Disclosure: Richard Gobel doesn't currently have a position in any of the stocks mentioned above.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
NFLX $480.07 1.10%
AAPL $129.08 0.48%
FB $79.74 0.98%
GOOG $571.00 2.30%
TSLA $197.27 -3.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.19 +12.69 0.60%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs