Watch for a Market That Stops Rewarding Good News

 | Feb 15, 2017 | 10:47 AM EST
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Sometimes the market is driven from the bottom up by action in individual stocks, and other times it is driven from the top down by action in indices, ETFs and futures. Today, is the latter. The easiest way to determine this is from breadth. Despite the fact that it solidly negative, the indices are hanging around in positive territory. Most big-cap names are doing little, but they are seeing flow from the ETFs that help to support them.

The market continues to have the feeling that nothing negative really matters. You can practically smell the dip buyers waiting to pounce if there is any dip. They are rooting for weakness so they can jump in aggressively. The funny thing about this market is that it is often the bulls that want weakness even more than the bears.

While I'm doing my best to stick with the trend and not worry about calling market tops, I've been a steady seller in the last few days. There have been some great moves, and I'm happy to lock in partial gains and raise my cash levels. That feels good, but it is frustrating when it becomes so difficult to find new setups and new entry points. I've added very little new recently -- and it isn't from lack of looking.

An astute trader mentioned this morning that what he is looking for isn't a market that ignores bad news, but one that doesn't reward good news. When we start seeing downside action on positive news, the dynamics that are pushing the market higher will start to change.

This market has consistently shrugged off early weakness and closed strong. It is working on that pattern once again. I'm respecting the bullish momentum, but it would be much easier if we had some more unextended chart setups.

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