The indices are off their early lows but it continues to be sluggish trading with very mixed and choppy action. Breadth is still negative and there continues to be few pockets of momentum. The hot group is banks, which isn't a sector that usually leads in a strong market. I'm still holding Bank of America (BAC) but did take some partial gains into the strength.
It looks like we have a little "climbing the wall of worry" action. Traders are concerned about a number of negative issues but when the market doesn't fall apart they slowly put some money to work so they won't be left out should the upside action continue. The longer the market holds up the stronger the inclination to put more money to work. It is the fear of being left out when negatives don't take hold that creates this phenomena.
While the indices are holding up this continues to be a tough market. For those that are playing indices and market direction there just isn't much movement and for stock-pickers, like me, there are very few pockets of action.
All trading depends on momentum to some extent. In bad markets it is of much shorter duration and intensity so it is harder to find and it requires faster moves. In a market with a good uptrend in place, it pays to be patient while waiting for momentum to work. That is not the sort of market we have now. In this environment if you don't take profits quickly they have a tendency to slip away.
It is important to keep in mind that this isn't bad action. There isn't intense selling or a rush to dump positions. There just isn't much interest. Don't let the dull action fool you into thinking that we are on the brink of a major disaster.
I'm looking for some new buys but there just isn't much showing up.
