No Fun for the Fundamenalists

 | Jan 11, 2012 | 6:26 AM EST
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The S&P has hit the levels that everyone can call breakout at the exact same time that I am struggling to find stocks to buy.

I know that sounds counterintuitive, but here's the deal. In an ETF-dominated world the technicians rule. If the fundamentals mattered, you wouldn't want to own the ETF, you would want to own the best of breed in the sector. But if the technicals are in charge, you just wait to see that breakout and you plow in.

Given the sheer number of people who act on these levels and how they trigger so many billions of dollars in decisions, you can see how anyone looking at a chart of the SPX right here says "I have to jump in." At the same time, if you look at many of the individual stocks in the averages, they seem badly overextended and ripe for a pullback.

But even there, the technicals rule. We had soft news from Microsoft (MSFT) last night, Steve Ballmer saying that personal computer sales are growing slower than expected. We had news from both GM (GM) and Ford (F) that they aren't doing well. We had horrid earnings from Juniper (JNPR), Alcoa (AA) and Tiffany (TIF).

Against that, we had a good quarter from Lululemon (LULU).

Doesn't matter. The technicals say you have to buy.

Here's another problem for us fundamentalists. This kind of action is treacherous. I don't like it when stocks are overextended and there's lots of bad fundamental micro news.

But that, too, doesn't matter to the chartists and to the many followers of the charts who think that things are getting more comfortable, not less.

So, I do something that has become a cardinal sin for so many,. I sit it out. Stephanie Link and I trim some holdings for ActionAlertsPlus. We get DEFENSIVE when the charts say get OFFENSIVE.

Before the total ETF-ization, commoditization, mechanization of trading, my view actually made sense to people. Now it seems positively antediluvian.

I stick by it, though. And I sense it will cost me some. I am willing to come back on a down day or two.

I just can't get shoehorned here, trying furiously to find a stock I like because the S&P is breaking out technically.

It isn't and never will be my style.

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