Baffled by this Market!

Even Jim Cramer of CNBC is baffled by the price action in US stock market.  In his show last night he admitted that he too hasn’t seen the following price actions in the market during his 34 years investing career.

As he correctly cited typically, when a stock runs up into its earnings report, investors will often take profits after the company issues its earnings numbers.  The usual buy on the rumor, sell on the news saying; where profit takers step in to lock up their gain. However, that’s not happening right now, in fact the opposite is happening.  Several stocks with strong run up in their price prior to reporting their earning continue to go up after releasing their results.

Another baffling price actions especially for those that make their decisions based on chart patterns or technical analysis is how stocks that have had a recent gap up in their stock price because of some good news be it market or company specific they don’t trade down to fill the gap.  Usually filling the gap by trading down is the norm before taking off again, however this hasn’t happened recently.

The other confusing action in this rally is how even stocks of companies that reported disappointing earning numbers only fell by a small amount and then instead of continuing to drop, their stock price turned around and is now higher.  Each one of them on their own isn’t that big of a deal but in tandem it does make it a rare market phenomenon.

Is this a sign that markets have gone crazy and we are now in the silly stage of this rally or that the bull market is stronger and more powerful than most investors dare to consider?

The views expressed in this blog reflect those of Grayeli Investment Management as of the date of the write up. Any views are subject to change at any time based on market or other conditions, and Grayeli Investment Management disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results.

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