Maintaining a Bullish Bias

 | Dec 08, 2011 | 4:35 PM EST  | Comments
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Conditions were good for a sell-the-news reaction to highly anticipated news from Europe, but I thought we might see a little better upside before the profit-taking kicked in. A flurry of European rumors at the close added insult to injury and we ended up going out at the lows of the day.

It was an all-around ugly day, but the question now is whether this is a healthy pullback or the beginning of a downtrend. In November, we had a very similar setup and we were pounded when the news flow out of Europe stayed ugly for days. If the European summit over the next few days doesn't give us something to be optimistic about, it is going to be quite challenging.

Although Europe is obviously an issue, I'm still maintaining a bullish bias into the end of the year. Market players are already poorly positioned for upside and days like today only make it worse. If we can put a Band-Aid on Europe for a little while, I expect to see the focus shift back to adding long exposure for end-of-year relative performance.

The weakness today helps charts to develop. We needed some better consolidation for the charts, and the higher level of skepticism helps the psychological setup.

If we have further weakness on the summit, I'd be inclined to buy, as I believe there is going to be an endless stream of European solutions and ideas that will prevent the bears from taking hold of the action.

We have to continue to navigate the news flow, but if we maintain an opportunistic mindset, it may actually be a positive. Just be ready for some quick swings and make sure you understand that good stock picks can be destroyed quickly with the next headline.

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

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