{+++}Helped by a strong rally on Monday, the major averages registered another positive week — S&P 500 +2.3%, Dow +3.1%, Nasdaq +4.2%, Russell 2000 +5.7%. And with this week’s gains, the Dow is now basically unchanged on the year (-0.2%), regaining most of its early 2009 losses. The rally was led by the Industrials sector (+5.7%), followed closely by Technology (+4.3%) and Consumer Discretionary (+4.0%). Health Care (-0.4%) and Telecom (-0.8%) were the only two S&P sectors in the red.
YTD the Nazzy is up 17%, S&P +4% and the INDU is about flat.
The bulls may be looking for a pullback as they wait for another leg higher, but the bears would love a bounce higher because they think another big move down is coming. Right now it is getting VERY difficult to find good long entries because so much has moved, shorts are also hard from my perch, because I like to see some validation that a trend has changed, otherwise it would be guessing and trying to pick a near term top. I expect a broad market pullback as this market is moving higher on light volume, dips are getting bought but I think it’s getting accumulated by “weak” hands that feel they have missed the move. There is nothing worse than performance anxiety, both on our level and the larger institutional levels As an example, a money manger may know in his heart of hearts that POT has almost doubled since the March lows and may not be a prudent buy, but the market will get some momentum and he starts taking out offers. That’s performance anxiety, the fear of being out of a trade is greater than being in a trade. That is fine if the market continues higher, but it is what inherently defines a “crowded trade” and when the first guy blinks, the levy starts to break. That is what could be happen and I will be ready with shorts if and when it does. I believe the dollar still has a bit lower to go but could also catch a bounce as it is very oversold, that could be one of the triggers that can temporarily derail the euphoric move in commodities. Oil continues to defy logic as inventory builds continue and the global economy is still a mess, but prices continue to go higher. That will be a great group to make miney from the short side when the first guiy blinks. Stocks like RIG have gotten way ahead of themselves. But hey, they could still mover higher here because the market has a herd mentality so they can easily over value price, just like they may have overdone things to a degree on the down side.
We have narrowed down our exposure in stocks recently and have been taking some profits. Be ready to re-enter some of our same names as their patterns are still fine in some cases, but in this market I wanted to monetize some of the moves. Please feel free to continue to hold some of the names if you are a seasoned trader, I am simply trying to get some of the newer traders in the habit of taking gains and not overstaying their welcome in certain names. Many subscribers have come to the site because they have gotten hurt in the market, many have brokers that told them when to buy but then hid under their desks or told them to average down. I personally applaud any of you who have set out on a mission to learn the market YOURSELF and get educated.
We don’t have much economic data this week, and they say never short a dull market, so it will interesting to see which beast shows up, the bull or the bear. The VIX is under 30 and fear is nowhere in sight, it is eerily reminiscent of past exhuberant rallies where people were convinced the worst was over.
Don’t forget two longs that are still developing, MFE over 41.03 and CREE over 31.75. Below are two new names, I have video done but encountering more code problems, I will let you know and post when it is ready. I posted charts so you would have some visual. I will be around in the morning. Good luck guys.
