One of the biggest challenges for many market players in recent years is staying heavily long. Over and over, we hear about underinvested bulls who can't seem to keep pace with the market. The action today is a good example of why this occurs.
What drove the market today was strength in oil, mining, steel and commodities. There was some strength in the FATMAN names and a few other groups, but it was clearly commodity-related sectors that led the charge. The problem is that there simply are no easy entry points in the sector. Virtually everything you will find has already made straight-up moves over the last couple of days. If you aren't in, there simply is no choice but to chase extended charts if you want to put money to work.
Obviously, chasing can work, but recently the market has had a tendency to reverse the next day. Buying some small oil and steel names like Chesapeake (CHK), SM Energy (SM) or Companhia Siderurgica Nacional (SID) can work, but they are not at entry points that lend themselves to aggressive action.
Even though it was mainly commodity-related strength today, we still had very strong breadth and the index charts are back to the top of their recent trading range. The tendency over the past couple of weeks has been for a quick reversal after a day like this, but the bulls are hoping the momentum is going to continue this time.
The bulls maintain their edge but they need to produce some solid follow-through to put this uptrend back on track. We have earnings coming up and that may change the focus, but for now it is all about mining, steel and commodities.
Have a good evening, I'll see you tomorrow.