With a lot of crosswinds currently blowing in the market, we feel that right now is a time to be cautious and flexible.
Major US indices finished mixed Friday, once again unable to build any momentum in either direction. This morning stocks opened higher on a better-than-expected jobs report, but sold off immediately after the opening bell. There seems to be a lot of indecision in the market right now, especially in regards to the fiscal cliff. There has been little progress made in the talks and analysts are laying out a variety of possible outcomes. Treasury Secretary Tim Geithner even suggested the White House was ready to go over the cliff before getting a deal done.
While the market didn't travel very far this week, there was major volatility on a stock-specific basis. Apple (NASDAQ;AAPL) had a roller-coaster week with the prevailing direction being to the downside. Selling was tepid on Monday and Tuesday, but the stock accelerated to the downside on Wednesday, returning to the bears' camp. The stock followed that sharp Wednesday sell-off by opening lower on Thursday, but staged a potent rally to finish 1.5% higher. Today, though, AAPL couldn't build on that reversal and fell 2.6%.
Any potential fiscal cliff deal is expected to include an increase in taxes for the wealthiest Americans, so companies are taking it into their own hands to get money out to shareholders in 2012. We have seen a wave of special dividends, and after the close we saw two more. TheWashington Post Company (NYSE:WPO) and Expedia (NASDAQ:EXPE) are both issuing special dividends that account for a full year's worth of dividends.
With a lot of crosswinds currently blowing in the market, we feel that right now is a time to be cautious and flexible. We are seeing some rare divergences and choppy price action. In this type of environment, it's best to trade very stock-specific and keep risk down. Patience is a virtue in trading.