Trudging Along to the Upside

 | Nov 14, 2013 | 4:26 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

FB

,

tsla

,

onvo

The indices built on yesterday's breakout moves, but it wasn't very energetic other than big-cap momentum names such as Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Twitter (TWTR). Breadth started negative and ended up 2-to-1 positive on the NYSE but slightly negative on the Nasdaq, which was mainly a function of weakness in small-caps.

I've often noted that markets at their highs don't suddenly reverse and go straight down, but that doesn't mean they won't stall. Despite good underlying support today, I had a very hard time finding setups of interest. There are very extended stocks, but we are also seeing an increase in new lows. Most troubling is that I'm not seeing charts that suggest sustained momentum.

Although I'm complaining about the action, the key takeaway is that nothing is glaringly negative. We are trudging along and the bears are incapable of digging a claw into the uptrend. I'd worry more about a short squeeze than I would anticipate a reversal.

I'd prefer to have more trading action but that isn't a reason to be negative. The trend continues to be our friend.

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


Nov. 14, 2013 | 1:30 PM EST

No Follow-Through

  • Yellen's testimony and Obamacare are sapping market energy.

The market action is both random and confusing. The indices are mostly green and breadth is slightly positive, but the underlying action is inconsistent and messy. A few big-caps, like Amazon (AMZN) and Apple (AAPL), provide a positive tone, but the small-cap indices are in the red and most secondary stocks are flopping around.

It is disappointing that we aren't seeing better follow-through after yesterday's breakout, but the market seems distracted by Janet Yellen's testimony on Capitol Hill and the drama over Obamacare. Neither really has much effect on the short-term action, but they seem to be robbing the market of energy.

Sometimes this sort of action creates some favorable trading in the very short-term, but I'm not seeing much of that. There's still strong momentum in a few places, with Voxeljet (VJET), Organovo (ONVO), Gogo (GOGO) and even Twitter (TWTR), but many of these names are extended and not offering easy entries. I've been digging deep trying to find new entries but I'm not having much luck other than a few little things, like China Recycling Energy Corp. (CREG).

The market action is not bad, but it just isn't giving us a whole lot to trade. All we can do is keep at it until something develops.


Nov. 14, 2013 | 10:32 AM EST

No Chasers

  • There isn't much energy to justify aggressive trading.

So far, yesterday's momentum and late breakout haven't attracted any chasers. In fact, the bears have their fingers crossed and are muttering about bull traps. The pessimistic view is that yesterday's move was ridiculous on anticipation of a dovish Janet Yellen when everyone already knows she is dovish. That is an ideal sell-the-news scenario.

Breadth is poor with nearly two losers for each gainer on the Nasdaq, which is mainly a product of underperforming small-caps. Precious metals are leading while chips and biotech lag.

I was hoping that we'd have better momentum this morning, but there isn't much interest. My Best Idea stock, Organovo (ONVO), continues to go parabolic, but I'm not seeing very good entries at the moment.

We'll see if the market can regain its footing as we move beyond the Yellen show, but there isn't much energy to justify aggressive trading.

LINE

Nov. 14, 2013 | 7:44 AM EST

Give Bulls Benefit of the Doubt

  • The worst thing you could have done this year is fight the trend.

So far, yesterday's momentum and late breakout haven't attracted any chasers. In fact, the bears have their fingers crossed and are muttering about bull traps. The pessimistic view is that yesterday's move was ridiculous on anticipation of a dovish Janet Yellen when everyone already knows she is dovish. That is an ideal sell-the-news scenario.

Breadth is poor with nearly two losers for each gainer on the Nasdaq, which is mainly a product of underperforming small-caps. Precious metals are leading while chips and biotech lag.

I was hoping that we'd have better momentum this morning, but there isn't much interest. My Best Idea stock, Organovo (ONVO), continues to go parabolic, but I'm not seeing very good entries at the moment.

We'll see if the market can regain its footing as we move beyond the Yellen show, but there isn't much energy to justify aggressive trading.


Nov. 14, 2013 | 7:44 AM EST

Give Bulls Benefit of the Doubt

  • The worst thing you could have done this year is fight the trend.

We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession.

-- Janet Yellen

On Wednesday the S&P 500 broke out of its recent trading range and hit a new all-time high. Market pundits, who are always looking for a cause-and-effect relationship, attributed the move to dovish comments from Janet Yellen in advance of her confirmation hearing, which starts today.

Yellen is a well-known dove and it should come as no surprise that she advocates for the continuation of quantitative easing, but the market has relied on the drug of cheap money for so long it is always pleased to hear that the supply isn't likely to dry up soon. The single best piece of investing advice over the last five years has been to not fight the Fed and those continue to be the ultimate words of wisdom.

While the headlines are giving Yellen the credit for the market move, the technical conditions have been developing in a positive manner and the market would have likely have found some excuse to justify a spike higher. As I mentioned yesterday afternoon, there is much talk lately among money managers about a melt-up or parabolic move as we enter the seasonally strong sprint into the end of the year.

There is also increased talk about bubbles lately, which is helping to provide some necessary skepticism and prevent sentiment from becoming too exuberant. I certainly don't share the view that the market is too frothy. In fact, the recent weakness in high-momentum leaders like Facebook (FB), Tesla (TSLA) and others and the mediocre trading in Twitter (TWTR) since its offering suggests the opposite. Even yesterday, there were only 300 stocks hitting new highs, while nearly 100 were making new lows. That isn't exactly wild chasing of a market that is flying to new highs.

The most important question right now is whether we are going to build on this breakout move or will this turn into a bull trap as big-picture negatives once again take hold. We had some poor economic news out of Europe and there is no question that the economic recovery remains fragile, but those things seldom have mattered when the central bankers are providing endless amounts of cheap funds.

From a technical standpoint, the worst thing you could have done in the market this year is fight the trend. Over and over again it has paid to ride the strength and to forego any efforts to trying to time a top. It is always tempting to say that this time it is going to be different and the bulls will learn a lesson about extended markets, but it just hasn't worked that way.

Yellen's testimony will receive plenty of attention today, but there is unlikely to be anything surprising. The bulls have the upper hand and are going to be working hard to build on the breakout. At this juncture I give them the benefit of the doubt.

Columnist Conversations

CH Robinson has had a higher gap opening the last four days in a row. Boy, someone really wants to own it (see...
The wicked, whipsaw action following FB's earnings release last evening warns me the stock likely has ended a ...
Lang:
This stock has been a dog for years, but its ears are perking here lately, and today has my eye. The May call...
Good afternoon! Oil has taken a swift turn this week and is showing further weakness ahead. Here is a quick up...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.