Don't Give Up Yet

 | Dec 09, 2013 | 4:19 PM EST
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It was a tedious day of trading with the indices finishing nearly flat and breadth clearly negative. Aside from Apple (AAPL), Twitter (TWTR), Google (GOOG) and a couple of other big names, nothing much happened. It would make for much better trading if we had real weakness and stronger emotions rather than this half-hearted bullishness.

While it wasn't a very interesting day, it is probably positive that we treaded water and continued to consolidate in the bigger scheme of things. Flat action helps to form a foundation for a good year-end run. It would be better if we actually had selling and more bearishness, but this action is so tiresome that it may be sufficient to cool sentiment.

It is listless action, but no one is willing to give up on this market. The whole year has been marked by underinvested bulls trying to find a way to catch up, and they are continuing to do just that.

It may not be very exciting, but this is constructive action.

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

Dec. 09, 2013 | 2:05 PM EST

Headaches and Complaints

  • Indices are in the green but not causing much excitement.

For a market where the indices are acting so well, an awful lot people are complaining. Action in Apple (AAPL), Twitter (TWTR) and Google (GOOG) is decent, but breadth is negative, small-caps are relatively weak and momentum is limited.

The market is dull, but no one is trying hard to short it and the bulls can't seem to stir stronger emotions. It isn't bad, but it isn't very good either. That makes trading tough. Quite a few traders have commented about how odd the market is. Even Investor's Business Daily noted that that recent action has been "puzzling." While that isn't bearish, it doesn't make for eager buying.

One reason the market is acting this way is the large group of people who want to position for a year-end rally. They would like to put money to work in pullbacks but they aren't getting many, so they are half-heartedly chasing a few things. That is holding the indices in the green but not causing much excitement.

I continue to look for new ideas, but mostly I'm getting a headache. We'll see what develops as the day winds down.

Dec. 09, 2013 | 10:26 AM EST

Flogging the Charts

  • You'll have to use force to put cash to work.

They tried to fade the opening strength, but my impression of this market action is that many underinvested bulls want to put money to work but are having a hard time finding openings. Perhaps I'm just projecting because that is how I'm feeling.

The indices are acting fine but breadth could be better than 2,850 gainers to 2,200 losers. Google (GOOG) is leading again and big-cap momentum names like Apple (AAPL), Baidu (BIDU), Chipotle (CMG), LinkedIn (LNKD) and Netflix (NFLX) are acting OK. Twitter (TWTR) is of particular interest as it heads for its opening-day highs.

My biggest positions tend to be oil-related plays. Refiners are acting well, and other miscellaneous energy plays like Fuel-Tech (FTEK), Navigator Holdings (NVGS) and Quantum Fuel Systems Technologies Worldwide (QTWW) are of interest. My stock of the week, U.S. Silica Holdings (SLCA), is a fracking play trying to make it through resistance at $36.

There's nothing wrong with this market action, but you'll have to use force to put money to work. I'm going to keep flogging the charts looking for ideas.

Dec. 09, 2013 | 8:07 AM EST

We Need Better Leadership

  • The action in individual stocks is not compelling.

There is nothing more deceptive than an obvious fact. -- Sherlock Holmes, "The Boscombe Valley Mystery"

The most obvious fact about this market is that we are hovering close to all-time highs. Despite what should be a celebratory matter, there is still plenty of head scratching among market players who are seeing some very mixed action under the surface.

Friday, in particular, was a deceptive day. While the indices looked quite strong at first glance, volume was a bit light and there continued to be unclear leadership. Probably the leading stock right now is Google (GOOG), but it is challenging to find other big-cap names that are performing like you would expect in a market that jumped so much on Friday.

A couple of other things that make this market unusual is that we had quite a few distribution days recently, which are days on which the market declines on higher volume. That is viewed as an indication of institutional selling and is negative.

Another recent development is the lack of correlation between the indices. The major indices are not moving strongly in tandem, as usually is the case when we have a good uptrend. We have small-caps lagging and there has been relative strength in the Nasdaq 100 mainly due to Apple (AAPL). The Dow and S&P 500 had good days on Friday, but did not recover their annual highs.

Ultimately it is always a market of stocks and the indices are secondary considerations, but I'm not hearing from many traders who are excited about the prospects they are finding in individual stocks. We always have some pockets of momentum, but there has been more than the usual number of landmines lately and many aggressive traders have been burned playing with some of the 'junk' small-caps.

What was particularly interesting about the market on Friday was that the general view seemed to be that good employment news might be a problem for the market due to the likelihood it would increase the likelihood of tapering off of bond buying by the Fed. Instead we seemed to have totally forgotten that fear and had a consistent bid. I suspect that may have been in part due to poor positioning by market players, but also there is other mixed economic news lately and that may have been enough to offset the strength in the jobs report.

Many bulls continue to count on strong seasonality to end the year. I'm certainly not going to argue with them, but the action in individual stocks is not compelling. We need better leadership, stronger pockets of momentum and more speculative action in small-caps. Those things can develop at any time, but right now the action is much more mixed than the indices indicate.

We have a little Monday morning gap developing, but sentiment appears contained and European markets are mixed.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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