Good Finish to a Good Quarter

 | Mar 28, 2013 | 4:18 PM EDT
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The first quarter of 2013 is in the books, and it was a good one. There was no shortage of negative news, especially if you listened to some of the pundits, and that helped to produce a steady climb of the proverbial wall of worry. We had a much greater tendency toward complaints about the market rather than celebration, and that was probably a big part of the reason we trended up so steadily.

The pundits never seem to learn, and they will be rolling out their predictions for the second quarter. You can bet the focus will be on trying to time a topic, but it has been very clear this past quarter that it simply doesn't pay to be anticipatory. The way to make money is to stick with the trend and forget the market-timing gurus who always have some reason why things are about to change.

They will shift at some point, and we'll probably even have a pretty good downtrend sooner rather than later, but trying to predict when is a losing game. It may not be easy to buy at this point with so many stocks technically extended and the news flow containing so many negatives, but the price action is the ultimate arbiter of success, and it clearly favors the bulls.

I'm sure the second quarter will present us with some new challenges, but I'm confident we can navigate them and make some money if we stay focused and reactive. The great thing about the market is that it always creates new opportunities.

Enjoy the long weekend, and I'll see you on Monday.

March 28, 2013 | 10:35 AM EDT 

Finishing Touches

  • Everybody's getting positioned for the new quarter.

The early market action has the feel of money managers trying to put the finishing touches on a good quarter. They want to protect gains and maybe make a few adjustments to start the new quarter in a good position.

Quite often, the last day of the quarter will see selling because of window-dressing and active mangers locking in gains and raising cash. It is always nice to start fresh, especially when we have a long weekend coming up.

I've done a little selling this morning as I work to make sure I keep my accounts as close to highs as possible. There have been good runs in small-caps Sarepta (SRPT), Himax (HIMX), Vipshop (VIPS), Consumer Portfolio Services (CPSS) and others, and I'm happy to continue taking partial profits.

Radian (RDN) was a new Shark Technical Buy this morning, and it looks good. It is now at a new closing high and working to gain further momentum.

Overall, market action is slightly positive with breadth running 2600 gainers to 2300 losers, but as I said, we often see profit-taking on the last day of a quarter, and I would not be surprised to see softer action later today.

March 28, 2013 | 8:27 AM EDT 

Will the Smooth and Steady Uptrend Continue?

  • A little choppiness would actually be a good thing.

I try to avoid looking forward or backward, and try to keep looking upward. --Charlotte Bronte

It is the last day of the first quart of 2013 and we can sum up the action with one phrase: Don't short me, Bro.

Ever since the market gapped up on the first trading day of the new year following the fiscal-cliff agreement, we have heard how this market was on the brink of disaster. There has been no shortage of negative arguments and they even picked up steam on the Cyprus banking crisis. But none of the negatives has mattered. The market has chugged along at an amazingly steady pace with only minor setbacks along the way.

What has been most remarkable about the action is how quickly and consistently the dip buyers have jumped on weakness. Only once during the quarter was the S&P 500 down for more than two days in a row, and every pullback has been completely reversed in a matter of days.

Although it has been a one-way market that has greatly favored the bulls, what has made it challenging is that we haven't had any real euphoria or excitement. Sentiment has remained mixed, with many bulls struggling to embrace the strength.

One of the biggest driving forces this quarter, in addition to the constantly squeezed bears, is that the bulls never generate the sort of extreme positive sentiment that signals that the market is extended. There always seems to be money on the sidelines looking for entry and it doesn't take much of a pullback to suck it in.

My advice all quarter long has been to stick with the trend, avoid anticipating a rollover and to respect the price action. The easiest mistake to make this quarter has been to try to guess when it tops out and to load up on the short side in anticipation of a top-out. If you have stayed reactive and not engaged in the top-calling game, you have likely done pretty well.

I suspect that the second quarter of 2013 will not deliver such a smooth and steady uptrend. A little choppiness would actually be a good thing from a trading standpoint, but my biggest concern is that volume will continue to slow. We have seen very dull action on very light volume, despite the market acting in a very attractive manner.

Despite the indices hitting new all-time highs, the individual investor has yet to return and embrace the action. Obviously, many are still struggling with the fallout of the Great Recession, and even though there has been some employment in housing and jobs, there are still significant headwinds preventing the sort of speculative action we saw when the market was at these levels in the past.

Virtually everyone agrees that the Fed has been a substantial driving force and is giving the market substantial support; however, talk about how much longer that can continue is slowly picking up and one day, down the road, this market is going to start to worry that the Fed no longer has its back.

The trend continues and the S&P 500 looks like it is going to hit that all-time high sooner rather than later. Stay bullish until there is weak price action. Trying to call a top in this market doesn't pay.

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