Once again, the bears failed to put much pressure on this market. They weren't even capable of a weak finish today. The bulls knew they would try and squeezed them hard enough to close the indices at the intraday high.
All major sectors were in the green. Most important, the S&P 500 managed a new record close. What is most impressive is that the buying is slow and steady. We aren't flying higher on big volume. We are just walking up in the face of a high level of skepticism. It is "climb the wall of worry" action, which drives many market players nuts as they can never seem to get in front of the action.
The easy thing to do is to complain and predict that it won't last much longer. The more difficult task is to stay with the market and make money. It might feel like it is late in the game, but it has felt like that for years, and if you turn bearish, you will quickly find yourself in trouble.
The trend is up. That is all we need to know right now.
Have a good evening. I'll see you tomorrow.
Feb 27, 2014 | 1:58 PM EST
The bulls refuse to give up on this market as we push back to slightly over the 1850 level of the S&P 500. But the buyers just can't seem to break though that resistance level with any authority.
Breadth continues to be good and there are active dip buyers, but just not enough momentum chasing to take us to new high levels.
It is going to be particularly interesting to see if we have weakness late in the day for the fourth day in a row. Patterns like that often become self-fulfilling as traders anticipate a repeat. If we don't fade, the bears could easily be squeezed if we see just a little buying pressure as we enter the final hour.
One of the big positives this market has going for it is that there continues to be quite a few anticipatory bears. They are convinced that the breakdown is coming soon and are probably overanxious in looking for weakness. The longer the market holds up, the more like they will cover and help to drive a squeeze.
The price action is still quite positive and I'm going to respect that and stick with longs until there is a shift in the action. Some of the things on my watch list into the close include E-Commerce China Dangdang (DANG), BioTelemetry (BEAT), Fonar (FONR), RXi Pharmaceuticals (RXII) and BioFuel Energy (BIOF).
Feb. 27, 2014 | 10:52 AM EST
Slowing Momentum a Challenge for Bulls
- But bears haven't had the juice to build downside momentum.
The market is off to a slow start but there are signs of underlying support and breadth is holding up with 2,350 gainers to 2,650 decliners. Solar energy and biotechnology continue to be the leading groups, but Tesla (TSLA) looks toppy and big-cap momentum names are slowing. Apple (AAPL) has finally bounced a bit and that is helping to hold the indices up.
The key is to hold above yesterday's lows and not trigger stops set at those levels. There hasn't been a good reason for traders to take a more defensive posture yet. They are still working to put money in play, which is why we keep seeing bouts of frothy intraday action. The bears haven't had the juice to build any downside momentum.
I'm playing tight defense and dinking around with a few smaller plays, not because I'm bearish but because the market has been showing signs of stalling and upside momentum is limited. There have been good gains lately and I want to protect them.
One position I added this morning is Vonage (VG), which is rumored to have won a deal with T-Mobile (TMUS). Technically, the stock is on the brink of a breakout above $5 and I'll be looking to build my position into intraday volatility.
I don't see too much else developing. We'll see how things play out, but the slowing upside momentum is going to be a challenge for the bulls in the near term.
Feb. 27, 2014 | 7:59 AM EST
Be Wary but not Overly Negative
- There still is lots of cash looking for a place to go.
The only way to make sense out of change is to plunge into it, move with it, and join the dance. -- Alan Watts
For three days in a row the market has started a bit slow, which attracted some dip buyers, and then closed poorly. There have been bouts of frothy action as the bulls continue to pursue aggressively high momentum names. Breadth has been quite good also but nerves kick in late in the day and profit-taking occurs into the close.
The bearish argument is that this sort of indecisive action is a signal that a topping process is occurring. The bulls aren't giving up, but they have some doubts. The poor finish to the day is an indication that they are taking some defensive action.
The bullish view is that this market made a big, sharp move off the February lows and we are now seeing some healthy consolidation as stock shifts into the hands of new buyers. The market went from oversold to overbought in near record time and now needs some time to digest that action.
It is easy to make a bearish argument here. The market has not had a real correction for some time and there are economic issues, a less aggressive Fed and a lack of positive news flow. We even have issues in Crimea now that are impacting European stocks this morning.
What the bears keep overlooking, however, is that there continues to be plenty of cash looking for a place to go. The market consistently comes back from each and every pullback simply because market players have no other choice to stick with the market if they want to make money.
The bears seem to think that there is a high level of bullishness and therefore little idle cash on the sidelines to keep driving things. They are wrong about the buying power, and that is why they keep getting burned.