Escape the Chase

 | Jan 26, 2012 | 10:48 AM EST  | Comments
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Stock quotes in this article:

pkt

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amzn

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nflx

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goog

It was pretty obvious that many market players were caught by surprise by the FOMC news Wednesday and have been scrambling to reposition.

We have had some chasing and have become even more extended, which is now leading to a quick reversal. We are taking out the opening lows as I write and now the latecomers are starting to wonder if maybe they made a mistake by chasing.

Breadth is still positive with precious metals, retail and technology leading, while oils slip and financials try to hold. Big-cap momentum names are leading with some bounce in names like Amazon.com (AMZN), Netflix (NFLX), Google (GOOG), etc. but it is cooling off gradually.

We all know the market has been going straight up and in need of a rest, but we also have a lot of miserable bulls who have missed out on upside and will want to buy weakness. Very little is set up well technically right now, but that can be fixed fairly fast if we ever rest a bit.

At this point my game plan is to simply protect the gains I do have and to make sure I'm buying solid charts and not just chasing out of fear of a further melt-up. One chart I bought this morning is Procera Networks (PKT), which has an upgrade and is turning up and challenging its 50-day simple moving average. Overall, I'm a net seller and feel comfortable waiting for a deeper pullback at this point.

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