Brace for a New High

 | Mar 26, 2013 | 4:31 PM EDT  | Comments
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Stock quotes in this article:

srpt

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himx

,

mntx

,

gass

,

amba

,

rdn

Volume was very light, and other than the cheerleaders on television, there wasn't much emotion, but it was another strong and steady day for the market. I suspect the bears have resigned themselves to the fact that the S&P 500 is going to make a new all-time high sooner rather than later and that end-of-the-quarter window-dressing may be the vehicle that delivers it.

What was most interesting about the action today was that the consumer confidence and housing numbers were poor, and the news out of Europe was not particularly positive either. Market players were unconcerned, and they slowly ramped up all day on solid volume. We even managed a close near the highs, which is always a positive sign.

It is very easy to come up with reasons to not trust this market too much, but as long as we are acting this way, there is little choice but to hold your nose and buy. It may not be easy to do, but that is a big part of why it works.

Window-dressing will likely peak tomorrow, and I'm betting that the S&P 500 will make the new highs that the folks in the media yammer about constantly. The trend remains our friend.

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


March 26, 2013 | 1:36 PM EDT

No Stopping It

  • I don't foresee this rally ending before the S&P 500 makes a new high.

Today's action is a good illustration of why I constantly preach sticking with trend as long as possible and not being anticipatory. The easiest thing to do in the market is to keep looking for an end to the rally. It's been running all year, the news flow hasn't been so good and momentum has been slowing.

It is very easy to make a bearish argument, but if you look under the surface, there are still plenty of stocks trading well. There might not be any frothy excitement, but there sure are impressive moves in selective small-caps. If you have been focusing on stock-picking rather than the big-picture arguments, you have likely been doing pretty well.

The biggest mistake I've been making lately is not being aggressive enough with my winning positions. I'm not taking sufficient size or I'm locking in partial gains too fast. I have to keep reminding myself of what I write: Stay with the trend and don't try to anticipate problems.

I started a position in MagnaChip Semiconductor (MX) and I'm eyeing a couple plays into the close. This rally may seem a bit long in the tooth but with window-dressing pressures about to commence, I don't foresee it stopping until the S&P 500 makes a new high.


March 26, 2013 | 10:43 AM EDT

Plenty of Slow Walkups

  • There aren't any major pockets of momentum this morning.

The bears are still anxiously hoping that the generally negative news flow will drive away the dip buyers, but isn't happening so far. Weaker-than-expected consumer confidence and new home sales are being ignored and the market is hitting intraday highs.

The buyers aren't falling over each other to add long exposure, but breadth is healthy at 3400 gainers to 1550 decliners and more than 200 new highs. All major sectors other than precious metals are in the green.

The hard thing about this action is that it is very slow again. There aren't major pockets of momentum, but there are plenty of slow walkups. Stocks I've mentioned recently, such as Sarepta (SRPT), Manitex (MNTX), Himax (HIMX), StealthGas (GASS) and Ambarella (AMBA) are acting well. I've added a little Radian (RDN), but that needs to trade back over $10.50 before I'm more aggressive.

I'm going to keep looking for new entries but there is some selling of strength now and I'm going to stay very selective. The bears are trying hard but it is going to take hard work to turn the mood. Dip buyers should continue to provide support.


March 26, 2013 | 8:15 AM EDT

This Rally Has Not Been Embraced

  • Where's the giddy sentiment associated with a market that's too frothy?

Life will always be to a large extent what we ourselves make it. --Samuel Smiles

After a steady uptrend since late November, the market has made little progress for the past couple of weeks. Cyprus has received most of the blame for the loss of momentum but, technically, the market was extended and in need of a rest anyway. Cyprus was just a good excuse for the market to do what it needed to do.

With the Cyprus starting to fade and the market working off its overbought conditions, the issue now is whether it is ready to resume the uptrend or see a topping process play out.

The first thing the bulls are likely to point out is that only a few days are left in the first quarter and window dressing is likely. This has been an exceptionally good quarter for the bulls and that means there is more pressure than usual to hold stocks up and post good numbers. Money managers will be anxious to tack on a few more points of performance, especially since so many are lagging their benchmarks the way this market has moved up.

The bears aren't likely to fight the notion of window dressing but after the Cyprus crisis, they are sure to return to their favorite topic: the lousy macroeconomic environment. The point that they will make very loudly is that Cyprus is just a symptom of much deeper problem in Europe that isn't going away soon.

The bears have a long list of negatives to focus on, including increasing interest rates, continued slowness in the economic recovery, a faltering housing market and, most worrisome, the potential that the Fed will not run its printing press forever.

There isn't anything new in the bearish arguments. They have been out there for months, if not years, and the bottom line is that the negatives just haven't mattered. Market players have been far more worried about missing gains than big-picture negatives.

As I have written many times, it has been a big mistake to focus on negatives when the price action is positive. It hasn't paid to anticipate trouble when the market is cruising along as if it doesn't have a worry in the world.

One of the ironic things about this market is that the rally has not been well embraced. Many bulls have struggled to put money to work and we have never really had the sort of giddy sentiment that you associate with a market that has been too frothy. On the contrary, there seem to be more folks wishing for a pullback than there are wild-eyed bulls high-fiving each other.

One of the big positives I've seen recently is that stock-picking has been working fairly well. I've posted a number of small-cap stocks that have worked well, even though the overall market has been mixed the last few days. Market players are still trying to put cash to work and they are actually somewhat selective, which is great for trading.

I don't have a whole lot of interest on my radar but the market still hasn't done anything really wrong. I see no reason to be overly negative; on the other hand, I want to manage positions tightly and not force them as there is some struggle out there.

The uptrend is still in place but there are a few flaws and problems. I don't see any reason to be aggressive with shorts and, with the likelihood of window-dressing as the quarter ends, we should be able to pick off some long trades.

We have a very quiet start this morning but a bit of a relief bounce as the Cyprus crisis starts to fade.

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