Stock market action might not be robust, but the stock market has made a full recovery from the correction that began in May. Investor sentiment is pretty decent right now, even though earnings expectations among large-cap companies have fallen considerably.
There are still good event-driven trades in this stock market, but no real tailwind from the broader market. Investor sentiment is up because the market is betting on new monetary stimulus. I bet the market is going to get it.
GenMark Diagnostics, Inc. (NASDAQ/GNMK) was a penny stock that recently experienced a solid turnaround on the stock market. This micro-cap biotechnology company sells molecular diagnostic testing systems for measuring DNA and RNA targets to diagnose disease. The company has a proprietary “eSensor” detection technology, which is designed to support a broad range of molecular diagnostic tests. The company currently markets three tests that are FDA-cleared for use: a “Cystic Fibrosis Genotyping Test,” “Warfarin Sensitivity Test,” and a “Thrombophilia Risk Test,” respectively. A “Respiratory Viral Panel” (RVP) has been submitted to the FDA for 510(k) clearance. A number of other tests are in development.
Chart courtesy of www.StockCharts.com.
GenMark came to the marketplace with a secondary offering of shares, and its timing couldn’t have been more perfect. The shares were well received, and the stock broke out of its trading range in early July. Then the company reported second-quarter financial results that investors really liked, and the position took off on the stock market; it recently hit a new record high.
So there is decent price movement out there, and investor sentiment is strong enough to carry stocks with good news. The main stock market averages are holding up very well at this time, and I would say that there are firm expectations for the Federal Reserve to take some new monetary policy action before the year is out. Investor sentiment is positive right now for this very reason. There’s also been a slight improvement in the employment and housing outlook, and this too is contributing to more positive investor sentiment. I’d be surprised if the main stock market averages would be able to accelerate much this month.
If the Federal Reserve disappoints current expectations for additional monetary stimulus, then investor sentiment will turn decidedly negative and the stock market will selloff. In fact, lack of action by the central bank could be the catalyst for a new, major stock market correction. I think the Federal Reserve knows this and will take some new action to appease Wall Street. Without it, investor sentiment will be in real trouble.