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Fleck's Thoughts
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AVGO showed the way, NFLX followed: Who's Next?


The market was modestly higher through midday after opening a little weaker, as the indices tried to shrug off Netflix's impersonation of the action in Broadcom, i.e., the way NFLX reacted to negative subscriber growth news with a sizable gap (about 15%) lower.

Back on June 12, after Broadcom was splattered after its latest takeover idea, I stated, "I think the bigger lesson is that AVGO gapped lower on what has been voted on as not being good news. That could be a roadmap for how other stocks with problems are treated as we make our way through earnings season. (Meaning that company-specific issues might finally matter, unlike all macro ones, which have been ignored.)"

A Hollywood Ending, Wall Street Style My point in bringing that up is that gaps like this would be a perfect end to the way these sorts of stocks have rallied maniacally, ignoring any and all news, and would really serve to trap people. Thus, I am curious to see if we get more of that sort of action during earnings season, as that would suggest to me that the market is ready to pick up some speed to the downside. Two datapoints are hardly significant proof, so we will have to see how things go, but as someone rooting for the return of sanity I am eagerly looking forward to seeing if this thesis plays out, although it obviously had no real impact today.

Turning back to the action, in the afternoon the Nasdaq aggressively "laughed off" the NFLX news (which cut its early decline in half) and the former had rallied 0.75% with an hour to go (when I had to leave). Meanwhile, the S&P was only 0.5% higher and the Dow was nowhere.

Away from stocks, green paper was once again the flavor of the day, oil was flat, as was fixed income, and the metals were pummeled for 1% out of the blocks. I must admit I was pretty surprised for most of the session, with the metals 1% lower, to see most gold stocks on my screen slightly higher. Ordinarily this would be a sign that the gold market was ready to turn almost immediately, but as we all know, the miners have behaved better than gold on most days for the last couple of months, yet gold has fallen $70 or so basically straight down.

We Seem To Have a Bad Connection This is one of the more unusual bits of disconnects (positive from the standpoint of a metals bull) that I can recall. Either the gold market is going to have to rally or one would think that the miners would potentially be more vulnerable, but thus far they refuse to buckle.

Positions in stocks mentioned: none.