Market Isn’t Tanking in the Face of Negative News, and That’s a Positive

Considering how negative the news flow has been here on Tuesday morning, the indexes are holding up fairly well. Not only do we have the negative earnings guidance from Walmart (WMT), but Shopify (SHOP) announced that it miscalculated the online shopping environment and is laying off 1,000 employees. Also, both consumer sentiment and new home sales came in lower than expected.

Despite all the negative headlines, there isn’t a rush for the exits, but buyers aren’t in a hurry to put more cash to work, either. At a bit after 10:30 am ET the S&P 500 was only down 0.8% and the Nasdaq was off 1.5% and breadth was only running about 3 to 5 negative. New 12-month lows are still less than 100 names.

The recent rally off the June lows was triggered when the market did not sell off further on a hot Consumer Price Index number and shrugged off recession worries. That provided hope that the worst has been priced into the market already.

This morning the Walmart news was certainly negative and was a surprise, but the damage that it is causing is limited so far. That can change, but it looks like market participants want to see what Microsoft (MSFT) and some of the other big technology names have to say.

Also, while the Fed is most likely to raise rates to three-quarters of a percentage point on Wednesday, as it has already indicated, it will be interesting to see how Fed Chairman Jerome Powell addresses the growing signs of a recession. The economy is shifting very quickly and there will likely be some acknowledgment of that, which could be market-friendly.

I’m doing nothing right now. There isn’t any compelling reason to buy into this dreary weakness. I’m not at all worried about finding opportunities for my precious capital when the price action improves.

Once again, I want to remind you that the goal in a market like this is not to identify the exact bottom. The goal is to buy where there is the best potential for sustained upside momentum.

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