Once again, market players managed the pattern that we have seen so often over the past month. The dip buyers showed up after a weak open and we traded up for most of the rest of the day before closing near the highs.
While that is a good pattern to see, the buying was much more sedate than it has been lately. The dip buyers hesitated for a while and never managed to push the indices into the green. Breadth lagged as well, with about 2,300 gainers to 3,500 decliners.
What saved the market from a trading standpoint was continued interest in speculative biotechnology. Quite a few junk names were in play as the hot money is still quite unconcerned about the overall market trend and macro-economic issues.
Once again, the softness in the market wasn't anything dramatic, and there is no reason to be overly concerned about it. We still have support, the trend is in place and it is good that we are working off some of the frothy emotions created by the Nasdaq 5000 celebration.
So while the action was a bit lackluster today, the market remains quite healthy. In fact, it may be in even better shape now that we've had a couple days of weakness.
Have a good evening. I'll see you tomorrow.
March 4, 2015 | 2:16 PM EST
Dip Buyers Finally Arrive
- ·But they aren't inclined to chase.
They took their time but the dip buyers finally did show up and provide some underlying support for this market. While they haven't managed to push things back into positive territory, they do have us well off the early lows. Breadth is still running two to one negative on the NYSE mainly due to oil, although biotechnology and solar energy are helping to give the Nasdaq a better tone.
I wouldn't be too fast to conclude that this very brief bout of corrective action has come to an end, but there are signs that the buyers aren't going to let this market sink too much. They are still beating the bushes looking for entries -- just not as inclined to chase much.
There still is some speculative action in small cap biotechnology names. It has been the favorite group of the hot money crowd for a while and they continue to find new plays every day. I took some Halozyme Therapeutics (HALO) today and I'm watching Second Sight Medical Products (EYES) very carefully as it sets up again.
We'll have a good indication of the mood in the final hour of trading. Good markets close strong, which has been the case for a while now. If we see more weakness in the final hour it will be a tipoff that sentiment is starting to shift.
Mar. 04, 2015 | 10:47 AM EST
Dip Buyers Slumber
- There is a definite change in the pattern.
The dip buyers could hardly wait for much of February to jump in when the market opened flat or a little soft. So far this morning, they are showing no interest at all and breadth is running very weak with just 1,075 gainers to 3,900 losers. Breadth on the momentum screens is even worse.
We'll see if the dip buyers wake up, but there is a definite change in the pattern and we'll need to be watch to see if it develops into something more problematic. As I discussed this morning, it is just a healthy pullback/consolidation at this point, but that doesn't mean that it may be the start of a topping process.
I don't want to sound too negative at this point. The trend is still up and we haven't had any major damage so far. But this is the sort of market where you can take some hits and give back too much if you don't stay vigilant.
My stock of the week, Lion Biotechnologies (LBIO, is acting well. There are a few other small biotechnology names on my radar like Orexigen Therapeutics (OREX), BioLineRX (BLRX) and Second Sight Medical Products (EYES).
While this action doesn't look very good at the moment, the positive spin is that it will help to create some better trading opportunities, especially if you are tired of constantly chasing.
Mar 04, 2015 | 7:44 AM EST
Put a Brick in the Wall of Worry ·
- The market needs some negativity now
Every now and then go away, have a little relaxation, for when you come back to your work your judgment will be surer. Go some distance away because then the work appears smaller and more of it can be taken in at a glance and a lack of harmony and proportion is more readily seen.
--Leonardo da Vinci
The day after the big Nasdaq 5000 celebration, the market struggled for the first time in over a month. That gave the bears hope that a top was finally forming, but, at this point, it is nothing more than just a healthy pause after a big run.
By almost any measure, the market has become technically extended on light volume. As I've discussed, we've had a remarkably consistent pattern of action for weeks, which has become too obvious to continue much longer. It actually is a good sign that we are seeing a change in the pattern as it shakes things up and allows for some consolidation and new setups to develop.
In recent years, we often see the bears and the pessimist become quite excited at the very first sign of weakness. It is understandable since they have had so little success and are quite frustrated when their chronic top-calling yields so little payback.
Unfortunately, the mistake they make is that not every little hiccup means that it's the beginning of the end. Healthy markets have bouts of weakness. In fact, one of the worst things about this market is that it has such brief periods of consolidation. Market players are forced to chase constantly and when we finally do rest, they are worried that things will start to run again, so they create conditions for further chasing.
The best thing the market could do now is to churn and selloff a bit more. We need some negativity and worry in the air to help build up the wall of worry, which is important because it means that there is cash on the sidelines that will slowly be put to work when the market doesn't fall apart.
One of the most confusing things about this market has been sentiment. It feels nothing like it did back in the days when the Nasdaq was last at the 5000 level. There is no real euphoria. In fact, the emotion is closer to dislike and downright loathing rather than joy and celebration. Many people don't trust the market, but they have seen it go straight up for five years and they are sick and tired of being left behind. That is a brick in a wall of worry, but the biggest worry of all isn't economic or the big picture. The biggest worry is not being in a market that never seems to go down.
Much of what drives the market now are central bankers and computer programs, which is why sentiment is such a mess, but money is still out there along with hesitancy to embrace the action, and that gives us underlying support.
The market needs a rest, more than just a one-day pause. There is no reason to believe that the market is topping, but we'll have to watch to see if the evidence builds. For now, watch positions, protect accounts and don't let recent gains slip away.
Overnight action was slightly negative and even though India has joined the quantitative easing party, it didn't do enough to offset some weak PMI numbers in Europe. A gap-down open is developing, and that isn't all bad.
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