Navigating a Sea of Red

 | Jul 23, 2012 | 11:00 AM EDT
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It has been a sea of red this morning with nearly nine losers for each gainer at one point. The only green out there has been the iShares Barclays 20-Year-Plus Treasury ETF (TLT) as market players look for safety. There is some minor strength in homebuilders on a Goldman upgrade and a little action in natural gas on takeover activity, but that is about it.

We are seeing a little stabilization now, but it is very skittish action, and we aren't seeing any signs of a big snapback attempt at this point. Technically, we are still above key support at the 50-day simple moving average of the S&P 500 at 1333, but you have to wonder if that is going to fall and give us a washout before we reverse.

As I discussed in my opening post, there is no upside leadership and no reason to be aggressive in building longer-term positions, although I've been nibbling on some Apple (AAPL) this morning in anticipation of a little pre-earnings optimism.

I'm having some luck with small trades in names I'm mentioned lately, such as Sunshine Heart (SSH), Horizon Pharma (HZNP) and Vringo (VRNG). I'm also adding back some Smith & Wesson (SWHC), which I believe will be a good defensive play, and I'm watching small biotechnology stock, Neptune Technologies and Bioresources (NEPT), which has a great-looking chart and needs a move through $4.75 or so to pop it.

We are bouncing a bit as I write, but my confidence in this market is very low. I don't believe the bears are finished, but that isn't all bad as far as creating some opportunities.



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