A Nice Comeback

 | Dec 21, 2011 | 4:28 PM EST  | Comments
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orcl

After a big day like Tuesday, you had to expect some sort of pullback or consolidation as flippers and "stuckholders" made their exits. Some bad news from Oracle (ORCL) helped the process, but we had an impressive recovery this afternoon, and the NYSE even finished with positive breadth of 1830 to 1181.

For a while, it looked like ORCL was going to take down the entire market. But the broader market eventually was able to separate itself from technology names and that helped improve the mood. The Nasdaq and Nasdaq-100, which are heavily weighted with technology names, did poorly but managed decent comebacks this afternoon.

My thesis has been that this upside would last for at least a few days. I was a bit worried this morning, but the reversal this afternoon was an indication that all the bullish psychological factors that I've been writing about are in play. Market players are not well positioned and there is still a great desire to rack up relative performance before the year ends. Positive seasonality often feeds on itself, and the turn this afternoon helps in that regard.

The tricky thing is the light volume and choppy trading. It was easy to take stops this morning that look quite poor in retrospect, but that is the cost of discipline. In thinner trading around the holidays, it is very easy to be jerked around if you play things too tight.

At this point, if the news flow slows, as it generally does at the end of the year, then we have a good opportunity for some pockets of speculative action to develop. One of the best things about trading around the holidays is that some small stocks can heat up quickly as the hot money seeks action. If we don't have any big macro drivers in play, it can make for good trading. That is what I'd like to see, but this market has not been very cooperative lately.

Overall, the market is looking OK, and I'll be watching for the bulls to keep on pushing.

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

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