Straight-Up Frustrating

 | Nov 15, 2013 | 4:30 PM EST
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The indices keep hitting new highs and the media is celebrating, but that doesn't mean there aren't complaints. Even the most positive bulls are having a hard time keeping up with this relentless rise. And being fully invested isn't going to save you unless you happen to pick the limited number of stocks that are doing most of the heavy lifting.

I keep writing about how we need to stick with the trend and forget market timing, but individual stock-picking has not been that simple lately. Small-caps have been underperforming and we still have an odd mix of leadership. For a market that keeps hitting new highs, breadth has not been that great. Even the number of individual stocks making new highs is small at just over 400. Typically, it should approach 1,000.

This straight-up action won't continue forever, but trying to guess when it will end is not a very profitable approach. You are better off digging for stocks that look technically attractive and then managing them careful. It is too easy to stand aside and keep hoping that things will come in and give you nice, easy entry points, but that has caused many funds to underperform this year. Stocks just don't provide those convenient buy points when they are going straight up.

I mentioned earlier this week all the talk about melt-ups and parabolic moves into the end of the year. A day like today just reinforces that thinking and raises concerns that sentiment might be a bit too frothy. Maybe so, but that sort of timing sure isn't working very well.

Have a great weekend. I'll see you on Monday.

Nov. 15, 2013 | 10:50 AM EST

Not a Feisty Market

  • But it is holding up.

The indices are following through and are in the green again, but the gains are mild and there isn't much energy. Breadth is running 2,400 gainers to 2,600 decliners, and most of the strength is coming from big-cap names like Amazon (AMZN), Netflix (NFLX), LinkedIn (LNKD), Chipotle (CMG) and Baidu (BIDU). Biotechnology is leading while semiconductors are declining.

While the action is fine, putting money to work continues to be a struggle. Organovo (ONVO) and Voxeljet (VJET) are acting well but not offering attractive entry points because they are so extended.

I posted Synutra International (SYUT) as a Shark Technical buy last night and got very lucky this morning when China announced that it was easing its one-child rule. SYUT is a Chinese manufacturer of baby formula and the stock is exploding higher as traders look for a way to play that news. It is a very thin play, but it's a good example of how it can pay off to think about the stock-related ramifications of headline news that may not seem obvious.

I could really use a few new plays, so I'm going to keep on digging. The market may not be feisty, but it is holding up.

Nov. 15, 2013 | 8:31 AM EST

This Never-Ending Uptrend

  • Just embrace it -- and forget market timing.

Dwell on the beauty of life. Watch the stars, and see yourself running with them.

 --Marcus Aurelius

2013 has been the year of the trend. The best way to deal with this market has been to forget timing and to simply embrace the never-ending uptrend. It is always tempting to latch on to the long list of negatives that the bearish pundits are happy to provide, but the big problem with this is that those negatives simply haven't mattered. The market doesn't care about macroeconomic arguments, sentiment, valuation or any number of other perceived problems.

So here's the market, yet again, walking steadily higher without a worry in the world. Fed chief nominee Janet Yellen, in her confirmation hearings, made it clear that the Fed will remain our friend for a long time to come. Meanwhile, even though the eurozone has seen its economic growth fall close to zero, the central bankers are still standing guard and making sure there is plenty of cash to hold things up.

The lesson of this market is that we need to stay focused on the price action and forgot all the other noise out there. As long as stocks keep on trending upward, and so long as support remains strong, we'll have little reason to be overly negative.

I don't want to pain too rosy of a picture, as there are some negatives to be found. Upside leadership is fairly narrow with a few names, such as Amazon (AMZN), Voxeljet (VJET) and Netflix (NFLX), while Tesla (TSLA), LinkedIn (LNKD) and others have lost their luster.

What bothers me most about the market action is its limited energy. Even as the indices have made new highs, we've seen a lot of churning and a lack of momentum in small-caps and secondary stocks. The high-momentum players -- who are usually on margin as the indices hit new highs -- still have cash on hand, as they find it difficult to find the sort of action they prefer.

The best advice I can give for dealing with this market is that you shouldn't overthink it. Stay with the stocks that are working, but make sure you have stops in place, and lock in some gains when shares make big moves. Keep on digging for new ideas and make incremental moves as charts develop.

Above all else, do not be overly anticipatory in looking for a market top. That has been the single biggest mistake many investors have made this year. When you constantly look for reasons that the market wouldn't be able to continue trending, and forego good longs for that reason, it can doom you -- as it has done for many -- to a lousy year of underperformance.

Again, it isn't difficult to find problems and negatives. But it's a major mistake to assume that they are suddenly going to be embraced by the market.

We have little news and a slight positive open on the way. I'll be looking for some new buys.

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