The S&P 500, Nasdaq 100, and Dow Jones Industrial Average futures are all pointing to a higher open, to which we can hear everyone out there saying, "Yeah, yeah, yeah." In other words, there is reasonable doubt that the opening indication is built to last.
Monday's action was the latest case in point where a positive bias early on proved to be a head fake that gave way to a headlong bout of selling interest that laid waste to the optimism generated by the pre-opening indication.
So, the stock market is saddled back up again, sitting high on the provision that it is due for a meaningful rebound from a short-term oversold condition, which we can hear everyone out there saying, "Yeah, yeah, yeah."
That doubt may just be the most convincing reason why the stock market has a good shot at delivering on today's pre-market bias since many participants are pre-conditioned now to expect selling into strength. If that does not happen with any real sway, there's a decent chance a rebound effort will gain some traction and that there will be skid marks on the road from short-covering activity.
All anyone can do is wait and see what the price action reveals and which sectors are part of the pricing action that swings trading sentiment. The focal points will be the usual suspects: the information technology, communication services, financial, consumer discretionary, and industrials sectors.
Their performance holds the key to whether today's activity ends with plus signs or minus signs.
Plus signs will be on the board with the opening tick. The S&P futures are up three points and are trading 0.2% above fair value. The Nasdaq 100 futures are down seven points and are trading 0.1% above fair value. The Dow Jones Industrial Average futures are up eight points and are trading 0.1% above fair value.
Given the scope of losses this month, those indications won't be described as being resolutely bullish. They are tentative at the core, because it hasn't paid in most instances this month to buy the dip.
The Dow Jones Industrial Average is down 8.6% in October; the S&P 500 is down 9.4%; the S&P Midcap 400 is down 11.4%; Nasdaq Composite is down 12.4%; and the Russell 2000 is down 12.9%.
What has the market hopeful today will produce a different result? We've already gone over the cookie-cutter explanation of being due for a rebound, but some other elements in play include the following:
- Faith in the resumption of corporate share buybacks
- Relief that foreign markets didn't come unglued overnight.
- China's Shanghai Composite jumped 1.0%, underpinned by claims from its regulator that efforts will be made to improve liquidity, share buybacks, and M&A activity (everyone together now, "Yeah, yeah, yeah").
- Month-end rebalancing activity
There has been a swath of earnings news since yesterday's close. Most of the results have been better than expected while the guidance has been mixed enough to keep alive the peak-growth narrative that has contributed to the multiple compression and collective effort to cut equity exposure.
Coca-Cola (KO), Pfizer (PFE), Mastercard (MA), Mondelez International (MDLZ), and General Electric (GE) were among the luminaries reporting results. MA and MDLZ are trading higher in pre-market action while KO, PFE, and GE are all trading lower.
General Electric will be a story stock, primarily because it missed third quarter estimates and cut its quarterly dividend to $0.01 per share, which is a far cry from what it used to be and a crying shame for so many investors who have come to rely on GE through the years to provide a safe and handsome dividend.
GE's news won't move the market because it has some well-known company-specific issues. Facebook (FB) does, too, and it reports after today's close. That report, though, can be market moving.
It's another wait-and-see item for a market that is looking for a new direction.