Summer Trading Kicks In

 | Jun 23, 2014 | 4:09 PM EDT
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Summer has started and we had a taste of it in the trading today. Breadth was a bit negative but it wasn't bad action overall. We had a fair amount of choppiness but did see a rally into the close that kept the major indices close to flat. There were pockets of momentum in names like First Solar (FSLR) and Tesla (TSLA), but small-cap speculation was limited.

The hardest thing about summer trading is that there tends to be more randomness, and if you don't have a strong bias, in either direction, it is easy to be shaken out of positions. Plenty of bulls are ready to hit the eject button, and many are being shaken out on intraday swings.

While plenty of traders made comments about it being boring action, it is needed to reset a few things. An extra dose of negativity wouldn't hurt as the "wall of worry" could use a few more bricks. It is going to take work for the bears to put a solid dent in this market. Dips and flat action are bullish, not a sign of the beginning of the end, so keep digging for opportunities.

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

June 23, 2014 | 1:19 PM EDT

Stay Focused on Stocks

  • And stay away from making dramatic predictions.

The market action continues to have a positive tone but it is very choppy and it is easy to be shaken out of positions. A couple of good examples are Facebook (FB) and my recent stock of the week, VASCO (VDSI). Both stocks move nicely one day and then look ready to roll over the next. FB has been bouncing around in a trading range for two weeks but can't seem to develop enough momentum to pop it. It is back to testing the upper limits today and will attract interest with a strong close.

My current stock of the week, GT Advanced Technologies (GTAT), is working on a cup-and-handle pattern and should attract interest with a close above $19. I have a position in it and will look to add on a good close.

While the market action is generally good, the entry points are increasingly challenging. We have breakouts from flag patterns like First Solar (FSLR) and Tesla (TSLA), but most of the extended stocks need some basing action.

Gold is an intriguing group. It had a big move last week before pulling back sharply Friday. Underlying support is kicking in and I expect that traders are looking at last Thursday's highs as key resistance levels. Precious metals stocks tend to trade differently than the rest of the market and are often good trades on pullbacks and weakness. I'm keeping a close watch on the group.

The big temptation in this market is to make dramatic predictions about the indices. We are hearing it from both bulls and bears now. Stay focused on stocks instead and you'll likely outperform.

June 23, 2014 | 10:37 AM EDT

More Wall of Worry Action

  • Keep digging for new ideas and don't get chopped up by volatility.

The first week of summer is off to a choppy start. Market players looked uncertain to start the day but they are perking up and we are seeing momentum again. At the top of the Mo-Mo list is Tesla (TSLA), which now is the "go to" name for the hot money. The chart looks good and shorts are getting crushed.

Breadth is running about 2,800 gainers to 2,400 losers. Biotechnology is leading but strength in momentum stocks and select small-caps keep the tone positive. Solar energy is lagging today but recent pick SunEdison (SUNE) is bucking the trend. Gold miners pulled back on Friday after a big move but the group is finding support and turning back up.

The key is that the market stays above the early lows. As long as it can do that, buyers should continue to inch in as they worry about being left out of a market that never goes down. This is wall of worry action.

I added some TSLA this morning and I'm eying Direxion Daily Junior Gold Miners Bull 3X Shares (JNUG) for bounce action. SuperCom (SPCB) is a thin name on my radar. The key to is to keep on digging for new ideas and don't get chopped up by volatility.

June 23, 2014 | 8:54 AM EDT

No Use Trying to Time the Market

  • Oftentimes, this means getting sidelined too early.

While the major indices have been slowly moving higher, the most impressive thing about the market lately is that momentum and small-cap names have been leading. The market is technically extended in a number of ways, but the underlying action has momentum traders feeling optimistic.

Of course, because the market is at all-time highs and acting well, we're hearing the usual contingent of bears predict that doom and gloom are bound to materialize at any moment. Some folks seem to have a pathological need to try to predict the exact moment that the market will make a top. The fixation on precise timing is understandable, but it can be extremely costly as well -- it often means getting sidelined too early and, too often, those lost profits more than offsets the gains from trying to predict the exact moment an uptrend will end.

The best way to deal with this issue is to let your individual stocks be your guide. If you are trading the indices, that is a different matter, but if you trade individual stocks they will be your best indicator of overall market health.

We had a good example of this back in March and April: The S&P 500 and Dow looked pretty healthy but, under the surface, individual stocks were sustaining tremendous damage. We're now seeing the inverse occurring, though it is not as severe. Many individual stocks are acting better than what the headline prices on the indices would indicate, but it is very easy to sell them prematurely if you focus too much on the market-timing bears.

As always, the bears have a slew of great arguments: Iraq, inflation, Ukraine, the economy and so on and so forth. There's never a time when there aren't some compelling bearish arguments, and the difference in opinion is what makes a market. But, while the bears may sound smart, that doesn't mean they can time the market very well.

The easiest thing to do right now is to look for reasons to bet against this market. The natural inclination toward timing that bet pushes many people to adopt a selling bias. The easy thing to do is to simply sell because the market needs a rest -- and it may well work out. But, rather than just dump stocks because you are fearful of a top, formulate a plan and don't sell until certain conditions occur. But staying patient in an uptrend often pays off nicely in further gains.

We are in a seasonally weak time of the year, and now that summer vacations are starting, trading will be slower as well. That can increase volatility, which can make it even harder to manage individual positions. But concentrate on the overall uptrend. The most important thing to do right now is stay focused on your stocks, and to pay no heed to market timing.

I'm struggling with some computer virus this morning, so I'll be unavailable for a little while, but I'll be back soon.

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