Market Amuck

 | May 08, 2013 | 4:32 PM EDT
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A late buy program triggered just in the nick of time and propelled the market to another strong finish. We had a couple intraday dips but they didn't last long as underinvested bulls seized the opportunity and put money to work. Many big funds prefer to buy pullbacks but they are so few and far between that the buyers don't even wait for red before they jump in on a downtick.

The action under the surface looked a bit weaker in places but Google (GOOG), Apple (AAPL), IBM (IBM) and a number of other big-caps covered it up quite well. We even had bounce action in beaten down names like Cliffs Natural (CLF) and all major sectors were green by the close.

We are now up 12 of the last 14 days, which is obviously a very strong trend -- so strong that even the top callers are hesitating. This market is running over not only the bears but bulls that don't move fast enough to keep up.

There is no choice but to continue to respect the trend. Anyone who has been trying to fight this market is in a very deep hole. If you insist on a bearish stance, stick to cash rather than shorts.

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

May 08, 2013 | 1:50 PM EDT

Take Refuge in the Charts

  • Forget the indices when the market acts like this.

A couple of minor dips were bought quickly as the market keeps chugging along without a worry in the world. Despite the positive action, I am seeing poor-acting small-caps, but big-cap leadership more than makes up for it.

What is so challenging about this market is that you have to respect the strength, but it can extremely difficult to buy when we are straight up for almost three weeks. Certainly, it is "good" action because stocks continue to run up, but that doesn't necessarily mean it is buyable action. I always find it a bit puzzling when people say that it's a great market, but they aren't buying anything. In my mind, a great market is one that is offering good buys -- and that sure isn't the case right now. It is great if you are fully invested and just riding the trend, but for traders who want new opportunities, it is becoming downright tedious.

I am wrestling with a very high disgust level as this market offers so little opportunity. It is always worse when the media is celebrating a market that is almost unbuyable, which feels like the case today. When I feel this way, I like to take refuge in the charts and forget the indices. Usually, if I dig long enough I'll find something of interest, but it is definitely very slim pickings and won't change until this market has some sort of shakeup.

May 08, 2013 | 10:58 AM EDT

The Price of Discipline

  • I can't put cash to work in this unending rally.

The slow, steady, slog higher continues. There was a minor dip at the open but that seems to generate an automatic buy reflex. Dip buyers are consistently rewarded, so they automatically jump in as soon as there is a little red.

The indices aren't flying higher so far but the buying support is impressive. Breadth is slightly positive but there continues to be little fear of downside. Biotechnology and precious metals are bouncing back after weakness Tuesday but homebuilders and oil are a bit sluggish. Big-cap names Google (GOOG) and Apple (AAPL) continue to lead.

I have a few small-caps that are acting poorly but YY Inc. (YY), my stock of the week, continues to act well and I'm tracking Security National Financial (SNFCA), which was a big winner in January and seems to be inching up into its earnings report. I'm still unhappy with my inability to put cash to work, but that is the price of discipline.

At the time of publication, long YY and SNFCA, although positions may change at any time.

May 08, 2013 | 8:15 AM EDT

The Power of Make-Believe

  • The way to make money in this market is to pretend you love it.

We are what we pretend to be, so we must be careful about what we pretend to be. --Kurt Vonnegut Jr.

It is becoming difficult to find new adjectives to describe the strength of the market uptrend. We are hitting new highs on a regular basis and it seems downright foolish to think that anything that can stop this rampage.

Typically, a market that acts like this would be generating excitement but, like many of the rallies since the 2009 low, there is little enthusiasm and many market players are downright disgusted with the way this market acts. If you want to make money, you have to pretend to love this market, even if you don't.

That is not easy to do because not only has the mood been sour but also volume is light and the action has an artificial feel to many market players. Seldom do markets this strong generate so much criticism and unhappiness, but that appears to be the new normal. In 20 years of trading, I don't ever recall a market hitting new highs that is so unloved.

The great irony is that the lack of positive feeling probably helps keep the trend going. It is classic "climb the wall of worry" action. Market players don't like the market but they feel left out so they keep inching in. The higher it goes, the more pressure there is to put cash to work, and that maintains a very strong bid.

The thought process of many trades is that the action feels artificial and unjustified. But if you want to make money, you have no choice but to embrace the trend. This is what I've been saying often lately as there really is no alternative.

There are bears who think the power of their logic is going to eventual prevail, but the level of pain while they wait for the market to shift is just too great. An anticipatory approach, especially a bearish one, has been a recipe for disaster in this market.

Even if you are bullish and embrace the trend, this market is extremely challenging. When we run up 11 of the last 13 days there just aren't many good entry points left. There are few bases and nothing seems to have time to consolidate. To put cash to work you have to chase and be willing to buy less than ideal charts. There are momentum players who don't mind buying overbought stocks and they have done well but those who are looking for normal volatility to set up entries have been very disappointed.

Although I'd really like to write that the market action is about to change and there will be more trading opportunities, I see nothing to support that idea. The way this market functions now, we have to keep looking for a slow, low-volume drift higher with every shallow dip bought immediately.

Buy-and-hold has been the best approach. If you are an active trader, you just have to respect the trend and keep looking for new opportunities.

The market will eventually shift, but we never know when. Embrace this market as best you can and don't change your stance until there is a change in the price action.

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