How to Play This Confounding Market

 | Jul 08, 2014 | 4:08 PM EDT  | Comments
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Stock quotes in this article:

csco

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orcl

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intc

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msft

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stx

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mu

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clx

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gis

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googl

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FB

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yelp

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cnqr

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celg

It just makes you like old tech more, doesn't it? Who can't handle Cisco (CSCO) being down $0.07? Intel (INTC) is down $0.25. Oracle (ORCL), even after posting a not-so-hot quarter, sizes up and is down about $0.30 -- and it has been strong. Microsoft (MSFT) is off by a dime. A cautious note about Seagate (STX) sent it down $0.50. Micron (MU), which has rallied 51%, is actually up a dime.

Meanwhile the live-by-the-sword, die-by-the-sword social media, ecommerce, cloud and biotech plays are giving up gobs of points right in front of our eyes. If you didn't get in at the bottom, you are on the verge of losing money -- again!  If you are going to lose money, at least lose it gracefully.

One of the most confounding parts of this market's performance is that the lower risk stocks -- I don't like calling them beta or "risk on/risk off" because that just confuses people -- have been giving nice, consistent returns.

I could say the same for the relentless nature of the Clorox (CLX) and General Mills (GIS) stocks or even the drugs, which tend to go up on down days and go up less or drop ever so slightly on the big days.

There's simply not a lot of reason to take risk unless you have already fallen behind. The fall-behind trade is typically to short these momentum stocks because the only reason why you have fallen behind is that you have been bearish. And you can't turn bullish now up at these levels without incurring tremendous suspicions from investors. That silent majority of fairly easily buffaloed investors are not people who can handle "buy high and sell higher." Discipline dictates not going long now because you already told your investors these are vaunted levels.

Of course, the good ones do barely go down. And if you buy some of the formerly good ones, such as the airlines, then you are betting that last month was an aberration. That's a bet I am willing to make, but I think I am the only one who would do so!

In Action Alerts PLUS, we make our peace with two at a time; right now, that means Facebook (FB) and Google (GOOGL). We absorb the pain that would be overwhelming if it were Facebook, Google, Yelp (YELP), Concur Technologies (CNQR) and Celgene (CELG).

More than that and you should sell tomorrow into the weakness. Less than that and you will have a real problem catching up with everyone else.

Random musings: Don't forget to take another look at the takeover names I mentioned on Monday . By tomorrow, they will be hurting and you will get your chance if you didn't pull the trigger today.

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