Tons of Charts Need a Rest

 | Mar 05, 2012 | 6:32 AM EST  | Comments
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Stock quotes in this article:

aapl

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cmg

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isrg

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azo

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pcln

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dltr

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sbx

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wfm

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mcd

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lvs

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hd

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dis

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ebay

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gps

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emc

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cat

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cmi

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fcx

Waiting for a pullback has been a total sucker's game so far in 2012. You have scored the best performance NOT waiting for a prudent pullback, but instead by being rash, seizing the trend and plunging right into it.

That's what makes this weekend's chart perusal so daunting. The stocks that have been the best -- Apple (AAPL), Chipotle (CMG), Autozone (AZO), Intuitive Surgical (ISRG), Priceline (PCLN), Dollar Tree (DLTR) -- haven't much of any correction at all, but are now in a place where it just looks hideous to step in. They just look like, without rest, they are going to crash right though the upper, right-hand corner of the page.

But stocks that look like that are more likely to crash right back down to earth.

I see tons of charts that need a rest, that need to gather strength again by doing nothing, the way Starbucks (SBX) and Whole Foods (WFM) and McDonald's (MCD) are doing. They've been doing a whole lot of nothing and they have much more reassuring patterns than the meteorite stocks, like Las Vegas Sands (LVS) or Home Depot (HD) or even Disney (DIS), eBay (EBAY), Gap Stores (GPS) and EMC (EMC).

Somehow, it does feel pretty binary. Stocks either do nothing for a bit, which would be hugely positive, or they go down. And those who waited for a pullback get to take a chance that, by this time, they don't even want because they have been so gun shy. The pullback would be so ugly that I doubt it would entice anyone from the sidelines.

Notice, when I say binary I am saying either do nothing or go down. Other than the banks, I didn't see many stocks that looked poised to go higher. I see a lot like Caterpillar (CAT), Cummins (CMI) and Freeport (FCX) that just seem exhausted, for now, perhaps because China seems willing to accept slower growth for the moment according to the reports we received last night.

In fact, ahead of a projection of 200,000 jobs being created when we get the payroll number Friday, perhaps the most dangerous move we can get is a further advance into the report. It might actually be a little less dangerous if we give up some today off of China and lower the stock expectations ahead of Friday. If not, we would be more vulnerable than we have been to a correction at any time in 2012.

Most of the big performers could benefit from some McDonald's time. Let the banks take over from here on a gentle path up while the wait-for-a-pullback people have to accept sideways performance as an on-ramp to stocks and nothing more.

That's the most constructive route right now. As a bull I hope it is taken.

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