The clamor of bad news from tech only grew louder on Thursday thanks to a premature press release from Google showing a massive earnings miss. This was followed after hours by disappointing news from Microsoft. When you combine that with poor showings from Intel and IBM it becomes hard to find a silver lining from this news.
What does it mean?
This weak earnings season is only getting weaker. The number and variety of companies with lackluster news extends beyond these tech behemoths. It may become hard for the market as a whole to trudge higher at this stage without some stronger catalysts.
Yes, I recently said that stocks were undervalued. That is unchanged. But investors never take a straight path from undervalued to fair valued. Instead we take more of a meandering course with tons of detours and pauses for reflection.
So after moving up towards the highs once again, I think we will sink back lower in the range. And probably will stay there through the election. Afterwards, if the economy is improving as it is now, then we will likely have a Santa Claus rally that gets us to around 1500.
As such, I am lightening up my long positions til early November in my trading account. Then plan on getting back to 100% long with good odds of making new highs to ring in the New Year.
Best,
Steve Reitmeister (aka Reity… pronounced “Righty”)
Executive VP, Zacks Investment Research
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