Stop Worrying and Love the Rallies

 | Sep 11, 2013 | 4:28 PM EDT  | Comments
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Stock quotes in this article:

aapl

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himx

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nq

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FB

The V-shaped bounce continues. It was rather slow in spots, but stocks continue to work their way higher. Apple (AAPL) prevented the Nasdaq from joining the party, and overall breadth wasn't too impressive, with just 2,850 gainers to 2,650 decliners.

A late buy program spiked us to the highs of the day at the close and helped to keep the media giddy with excitement over the run. The media seem to enjoy the strength much more than many of the traders, but that is nothing new.

I am a bit tired of writing about it but the way to deal with this market is to simply embrace it and not worry about what may go wrong. Too many traders focus on timing the indices, and they end up missing out on the very good action in many individual stocks. The money is in stock-picking, not trying to call market tops.

When the market goes straight up like it has the past week, it becomes increasingly difficult to put new money to work, and that causes much frustration. There is no easy solution but to keep plugging away an digging new ideas. The bulls are in control, and as long as you appreciate that, you have the potential to make some money.

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


Sept. 11, 2013 | 1:50 PM EDT

Dip-Buyers Keep It Interesting

  • The underlying support is nothing new.

The dip-buyers didn't let this market stay in the red for long. They are ignoring the poor action in Apple (AAPL) (which isn't much of a leader anyway) and continuing to put cash to work. It feels complacent, but the underlying support is nothing new.

While the mood is sedate, the attitude seems to be that they aren't taking this market down so might as well keep buying. The biggest danger is being underinvested rather than suddenly being caught in a reversal.

Facebook (FB), which I mentioned earlier, is plugging along nicely and a number of momentum names like Yelp (YELP), LinkedIn (LNKD) and Qihoo 360 (QIHU) are picking up again.

I suspect the bullish cause is being helped by overanxious top-callers who are being squeezed. You would think they might have learned that trying to call a top in this market is an exercise in futility, but the desire for the glory of being someone who "nailed it" keeps them trying.


Sept. 11, 2013 | 10:10 AM EDT

Pulling for a Pullback 

  • We need one to get better trade setups.

We have choppy action as the poor Apple (AAPL) reaction weighs on sentiment and market players look for reasons to lock in gains. Breadth isn't too bad with about 2,000 gainers to 2,800 decliners, but there isn't much standout momentum today. During the entire correction in August, many of the high-momentum stocks held up extremely well, but many are now extended and the chasing is cooling off.

I'm looking for charts to reset and, hopefully, give us better entries. It is still early but I'm working on my watch list.

I added to Himax (HIMX), which was a Shark technical buy this morning. It received a $12 price target from Northland this morning. 

I also added a little Facebook (FB) on a shallow pullback. That is one I want to build as I think it has substantial upside longer-term, but in the short term an interview with CEO Mark Zuckerberg may serve as a catalyst for a flip. NQ Mobile (NQ) had a couple plugs this morning that resulted in early strength but it is fading in the weak tape. That is another stock I want to build for the longer term.

The selling is picking up as I write, and I'm going to sit back and wait for setups to develop. We need this pullback to give us better trades.

At the time of publication, Rev Shark was long HIMX, FB and NQ, although positions may change at any time.


Sept. 11, 2013 | 8:11 AM EDT

A Bumpy Ride Ahead

  • Those who don't embrace change will struggle.

Everyone thinks of changing the world, but no one thinks of changing himself. --Leo Tolstoy 

After levitating for the past week, we have a quiet open as the market consolidates recent gains. There is a little renewed anxiety over Syria after President Obama's speech last night but market players are just catching their breath after a big run. There is some inclination to look for a reason to take profits but most traders have learned that it is a mistake to try to call a market top.

The rally over the past week or so was typical of what has occurred in this market since the advent of quantitative easing. We rally suddenly and unrelentingly even though the technical patterns are problematic. The mood never becomes very giddy as many market players are poorly positioned and have to scramble to add long exposure.

I don't know how many times I have heard rallies in the past year or so described as "hated." There always seems to be many who are reticent to embrace the moves and those that do are always struggling to be fully invested.

I suspect the antipathy toward the market strength is a function of the way stocks now move. We don't have the normal ebb and flow that allows for easier entry on pullbacks. If you don't chase straight-up moves, you have a very hard time finding good entries.

One of the big changes I've noticed in the market over the past couple of years is how much more willing many traders are to chase stocks that are technically extended. More traders will now only buy stocks hitting new highs on big volume and they have few worries or concerns about buying things that have gone straight up. 

There have always been momentum chasers in the market, but the action is more lopsided as computer programs support these moves. Many traders have a hard time adapting to this sort of action but they find that they have little choice because the opportunity to buy strong stocks on dips is so limited.

In the 12 years since 9/11, many things in the world have changed and will never return to the way they were. That includes the stock market. The traders who are struggling are those who aren't able to embrace the fact that it is a different environment and stocks move in a different manner. What is most difficult is that even if you recognize the difference in behavior, it can still be very difficult to embrace it fully, especially since it may not seem very logical. 

Dealing with this market in the last few years has required a change in thinking that many have not been able to handle and that has caused the mood of rallies to be different. The irony is that this less positive mood has probably contributed to making the market even more lopsided to the upside.

Apple (AAPL) is being pounded in the early going on downgrades and that is affecting the mood this morning. We are due for a little consolidation and AAPL is going to do its part by weighing down the Nasdaq.

I'm going to continue to look for new long exposure and will ignore the market-timers who have been clueless about how to trade this market. The key to success lately has been to listen to individual stocks. If you have been in the right ones, you'd never even know that this market has corrected recently.

Buckle up. It's going to be a bumpy ride.

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