This Market Just Won't Quit

 | Feb 01, 2012 | 4:46 PM EST
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This is the market of the never-ending bid.

After the market went straight up for the entire month of January, a number of market players were anticipating that the indices might take a rest. We had four straight days of mixed action to end January, and it looked like we might be weakening, but it turned out to be a bear trap, and it was sprung today.

What made today particularly impressive was that the upside move picked up steam even though there really wasn't any real catalyst for the strength. Economic reports were mixed, Greece continued to promise it would have a debt deal any minute, Amazon's (AMZN) earnings were weak, and there wasn't any real positive headline news. In the perverse manner of the market, that probably helped to keep things running, as it increased the fear of being left behind.

Although we have had a number of runs like this in recent years, these markets with the never-ending bids are not as easy as they look unless you just buy and hold and never have an interest in selling an extended stock. For more active market players who try to make money by timing market turns, this sort of action can be very challenging, because the smart move is to simply buy and sit. If you like to actively buy and sell, you will lag, because selling anything turns out to be a dumb move so often.

The best advice I can give for dealing with this sort of action is to simply not try to fight it. You may not want to buy, and you might even want to take some profits, but don't try to short it until there is some actual weakness first.

Some bears are convinced that a big move on the first day of a new month when the hottest IPO since Google (GOOG) is being announced is a sure sign that a top is near.  They may turn out to be right, but betting on the bears has been a losing proposition, and until something changes technically, it doesn't matter what the negative arguments might be.

Have a good evening. I'll see you tomorrow.

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