The market pattern so far in 2012 is clear: fade the open. If it's weak early, buy. If it opens strong, sell
The market enjoyed a nice move today, but it all came at the open. We had no traction intraday, which is exactly what happened on Jan. 3, when we kicked off the new year with a big early gap.
We are up nearly 3% in a week but it all came overnight. The last four days, when we opened weak and then rallied, produced much better action for day traders than what we had today. We had just minimal intraday movement, which made stock-picking very challenging, but there were things that worked.
Even though all the gains came at the open, it was an extremely strong day. Breadth was better than 3-to-1 positive, and all major sectors, particularly oil and commodity-related names, did well.
The main thing to keep in mind about action like this is that it creates a lot of underlying bids. Those who get caught underinvested tend to become aggressive dip-buyers, especially since many of them are suffering from underperformance.
As I've often pointed out, one of the most challenging aspects of this market has been its inclination toward low volume, V-shaped moves. We tend to keep on running even when we are overbought on light volume. The easiest mistake to make is to be overly anxious anticipating a reversal.
Once again, we're in a very familiar place. The indices are acting well, but don't have convincing volume or momentum. That makes it tough to put money to work. You don't want to fight the strength, but it isn't very easy to embrace either.
Have a good evening. I'll see you later.