The March Higher Continues

 | Jan 29, 2013 | 1:59 PM EST  | Comments
  • Comment
  • Print Print
  • Print

Today's action is a particularly good illustration of how strong markets have a tendency to stay sticky to the upside. Markets that go straight up don't just reverse suddenly and go straight down. It is very rare for markets to collapse when they are hitting highs.

It takes a while for topping action to play out. There are always late comers who have missed much of the move and they are looking for entry points on any pullback. In addition, there are the premature bears who end up servicing as short squeeze fodder. Performance anxiety is another driver that tends to keep markets running. People have a tendency to be more worried about missing more upside than they are about being caught in a reversal.

When the market starts to top, one of the first things we will see is that leadership and momentum tend to narrow. Fewer stocks will be running, but there is still enough money chasing that it keeps the indices up.

Another sign that a top is forming is when we see weak closes. We haven't had any of those lately and the action today is textbook bullish again. The market opened soft, and even had bad news, but buyers jumped on the shallow pullbacks. As the day winds down, the market is already hitting intraday highs.

The main clue that many technicians and momentum players use to signal that the market is topping is distribution days. When the market has a down day on higher volume it signals that institutions are selling and a top may be developing. Since there's barely been a negative day this year, distribution is not yet a problem.

My biggest complaint is that there isn't much energy. The market is sleepwalking higher and it is extremely difficult to be aggressive. I see some patterns I like, but I'm not able to put much money into them.

It might not be too exciting, but this market is still acting just fine.

Columnist Conversations

TrueCar, Inc. (TrueCar) is a data-driven online platform operating a technology infrastructure, powered by dat...
Financial Planning magazine reports that... The Internal Revenue Service is considering regulations to limit t...
MMM is rolling over. Early last week the stock began to fall out of a steep bull channel before retestin...
Higher tariffs are a sign of increased floating inventories that will be available for immediate withdrawal on...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.