As I go through the charts this afternoon, I keep asking myself, "Who buys that?" I look at stocks such as Steven Madden (SHOO), Fossil (FOSL), Expedia (EXPE) and just about half the stocks in the market and think they are classic short setups, but here we are hitting the highs of the day on superb breadth.
I often wonder if the computers are programmed with an algorithm that has them buying the charts that are the most obvious short setups. Many short-sellers have very limited tolerance for pain, and it isn't too hard to induce the underinvested bulls to chase things that are moving straight up.
One thing I've learned often is to not fight the action that seems totally illogical. If you want to play, you need to react rather than anticipate. A week ago, it was the overly anticipatory bulls who were pounded and now it is the overly anticipated bears who are taking a beating.
I'm staying selective with a few quick trades such as VirnetX Holding (VHC), which I mentioned this morning but overall I'm a net seller. Despite the inclination of this market to act contrary to what appears to be common sense, I still have no desire to embrace it. I'd rather be less active than take trades that just don't make much sense to me.