While the indices are down, the market has already bounced quite strongly on the better-than-expected ISM Services report. However, what continues to be most notable about the market action is the strong momentum action. Stocks such as Tesla (TSLA), Facebook (FB), Canadian Solar (CSIQ), Priceline (PCLN), Apple (AAPL), Trulia (TRLA)and SolarCity (SCTY) are acting like it's a roaring bull market -- which it may well be.
I'm going to be out for a while today, so I'm doing a little profit-taking in names I have mentioned lately, including Acadia Pharmaceuticals (ACAD), Zeltiq Aesthetics (ZLTQ)and Biodel (BIOD). But there really isn't any compelling reason to lighten up too much. One thing that is a bit worrisome is that it feels like a number of bears have thrown in the towel lately. They have stopped adding to shorts and I'm not seeing as many predictions of impending disaster.
I continue to believe that the best move is to stick with the long side until there is a change in the price action. It is tempting to make the big "the top is in" call but it has been a very expensive way to gain attention.
Aug. 5, 2013 | 08:39 AM EDT
A Stubbornly Strong Market
- It simply hasn't paid to anticipate weakness.
Is it time to start anticipating a market reversal? The major indices are sitting at all-time highs, but earnings season is winding down, economic data has been mixed and the Federal Reserve isn't likely to say anything new at this point. We also have negative seasonality kicking in as we enter the slowest period of the year.
It isn't difficult to make a bearish case, and with both bulls and bears hoping for some pullbacks, there is a natural inclination to root for some softness. There is only one big problem -- this market is stubbornly strong, and it appears to have very strong underlying support. It simply has not paid to anticipate weakness.
The way to handle this market becomes very clear when we look in the rear view mirror. You stick with the trend and you don't try to short it until there is some actual price weakness. What has been interesting lately is that the hot pockets of momentum seem to be increasing. We're seeing more chasing lately, and more extended stocks, as investors seem to think they are never going to get ahead of this market unless they pay up.
The bulls are loving this action, but it's been a major challenge putting money to work. Stay prudent with your entries, but don't be seduced by the bears who have been anticipating a reversal all year. The time to be negative is when the market starts to act negative.
I have some personal matters to attend to and will be out for a bit. Good luck.
