Bull market corrections are swift and sharp. The post-holiday downdraft is taking its toll on many sectors that recently led the market, like airlines and health care, while defensive names jump back into fashion.
Yes, we are still in a very fickle market with behavior issues, to put it mildly.
At the same time, the market came into earnings season pretty hot and was due for some profit-taking this week, when both the earnings and economic calendars are light.
Short-term trading still dominates the landscape, and the rash of IPOs is being digested like a big meal that takes time. I have noted that a pullback in front of the earnings parade would be a net positive and very timely for the bullish camp — and I stand by that conviction. A three-day consolidation period would, in my view, set up the broader market to reward traders and investors into the heart of the Q2 reporting period.
Depending on how Alcoa (AA) earnings look tonight after the close, this pullback may just be a two-day event. What is key about Alcoa is not so much the net profit, but the commentary on what it sees in the many industries it touches. It’s a good tell on the global macro business climate … and it will likely steer sentiment in one direction or the other.
Bryan Perry is the editor of Cash Machine, a newsletter focused on high-yield income investing with the goal of maintaining a blended total yield of 10% across two portfolios. Bryan is also the editor ofExtreme Income, which uses the power of historically cheap money to create a leveraged “baby hedge fund” strategy that paves the way to massive profits and 4x greater income.