A Welcome Pullback

 | Mar 27, 2012 | 4:35 PM EDT
  • Comment
  • Print Print
  • Print

The market held up well most of the day but a flurry of selling finally hit in the last hour of trading and we closed weak. Volume was pitiful and there wasn't any big rush for the exits, but some good old-fashioned profit taking finally kicked in and the bears breathed a sigh of relief.

It is refreshing to see that the market is capable of moving in both directions -- at least that is more normal than the lopsided, machine-driven action we've seen lately. If you actually want to trade aggressively a little volatility is a good thing. There are a lot of stocks that will look much better if they rest a little.

I'm sure the top-callers are going to be excited about this weak close, but in the bigger scheme of things, it is more a positive than a negative. A little routine consolidation after a big run like we had yesterday isn't a sign of impending doom. In fact, if this is a top, the likelihood is that we will see plenty of choppy action before there is any significant downside. Markets at their highs simply don't reverse and go straight down. They go through a process of slow disappointment, which eventually results in more aggressive selling, but that underlying support generally doesn't go away quickly or easily.

The best thing that could happen to this market right now is a higher level of volatility that allows profit-takers to exit and stronger buyers to move in. Good buyers are not going to chase, so we need pullbacks to entice them.

Although it is premature to declare a market top, that doesn't mean we might want to tighten up our defenses and protect recent gains just in case the selling pressure starts to build. If you error on the side of protecting gains and keeping your portfolio near highs, you will be in good shape to produce superior returns as the market becomes more volatile. I don't want to predict when this endless uptrend will come to an end, but I'll react quickly when it does.

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

Columnist Conversations

today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...



News Breaks

Powered by


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.