The dip buyers were a bit slow to go to work, but they showed up at midday and helped to deliver a pretty good close. The Nasdaq and Russell outperformed, while the DJIA and S&P lagged.
Breadth was positive, but not wildly so, but that was made up by some very strong action in a number of sticks like Tesla (TSLA), TrueCar (TRUE), Canadian Solar (CSIQ), Baidu (BIDU), Digital Ally (DGLY) and so on. There continues to be a high level of speculative action and that is helps to keep the underlying support strong.
The toughest thing about this market is that there quite a bit churning, but not many pullbacks to make entries easier. Those who are waiting for the inevitable pullback to occur just keep us running as they end up buying because they are tired of being left out.
Volume did pick up today, which isn't surprising, but is a positive. We are still technically extended without much nearby support, but the buyers don't seem at all worried. It is very easy to worry about this market, but it helps to stay focused on individual stocks that are acting well rather than to contemplate big picture negatives. There is just too much positive action to be overly negative.
Have a good evening. I'll see you tomorrow.
September 2, 2014 | 1:21 PM ET
Market's Looking a Little Tired
- I'm not counting out dip buyers, but manage your positions.
After a good start the market is acting tired and the dip holders are hesitating. The dilemma of this market recently is that when we do have some softness it has been enough to really create good buying opportunities. We never seem to cause any real worry among the bulls and the bears are so skittish they quickly take their small profits and provide some support.
Breadth is now negative and picking up steam. The NYSE is running 11-to-19 red, while the Nasdaq is still close to even. We have no real sector strength to speak of, but Tesla (TSLA), Digital Ally (DGLY) and a few others are attracting the hot money and keeping it busy. The momentum is still out there but it is narrower.
I have a few things of interest on my screens like Vasco Data Security (VDSI) and China Automotive Systems (CAAS), but there are a number of small-caps that are seeing bids dry up and are pulling back rather hard. The losses can come quickly when small-caps turn, so you have to stay vigilant and have a plan in mind should support levels start to fall.
I'm definitely not counting out the dip buyers yet, but that doesn't mean you can't manage positions. The purpose of stops is to prevent small losses from turning into bigger ones. Quite often they will see, ill-advised in retrospect, but they can pay off big when the momentum finally does shift.
September 2, 2014 | 10:58 AM ET
Muted Pockets of Momentum
- The overall market action is a bit slow but technically remains healthy.
We have the standard gap-up open to start the week, but the buyers look like they are still trying to recover from the long weekend. Better-than-expected economic reports are causing a little pressure as concerns mount that the Fed will be pushed to raise rates sooner or later. The iShares 20+ Year Treasury Bond ETF (TLT) is backing up that view with a big reversal this morning.
The best news at the moment is that small-caps are outperforming and breadth is solid with 3,100 gainers to 2,200 decliners. Retail is the leading sector, but there isn't much standing out as far as industry groups. Tesla (TSLA), Digital Ally (DGLY) and Palo Alto Networks (PANW) are the momentum leaders, with a smattering of China names such as Baidu (BIDU), YY (YY) and others helping the bullish cause.
After the run we've had, there is some hesitance to chase, and we are seeing that with muted pockets of momentum. It isn't bad action at all but looks a little tired. We have an inclination to recover from these slight dips that occur after the gap-up, so I'm not feeling very negative.
I'm looking to get a few things going but haven't seen much yet. I'm buying Taser (TASR), which looks like it is finally seeing some sympathy spill over from Digital Ally. Zeltiq Aesthetics (ZLTQ), Arista Networks (ANET), Apple (AAPL), Independence Contract Drilling (ICD), BioDelivery Sciences International (BDSI) and Profire Energy (PFIE) are a few that are popping up. Vasco Data Security International (VDSI) and Tarena International (TEDU) are on my list for additions. Kandi Technologies (KNDI) is another China name that I'm watching closely after a private placement took it down on Friday.
The overall market action is a bit slow but technically remains healthy. It all comes down to some stock picking, but don't forget the stops.
Sept. 2, 2014 | 8:17 AM EDT
Those Silly Top-Watchers
- Some people simply find it impossible to resist the timing game.
No man needs a vacation so much as the man who has just had one. --Elbert Hubbard
With the end of summer and the start of school, the first trading day of September always has the feel of the start of a new chapter in the market adventure. Unfortunately that new chapter is often difficult: September is, historically, the worst-performing month of the year. That has not been the case in the last four years, of course, but 2008 has been hard to forget.
Beyond this, it's interesting that the market is totally ignoring a more hawkish Federal Reserve and international events such as the crisis in Ukraine. There just isn't any real worry about big-picture matters right now. In fact, the major positive at the moment is that the eurozone economy is still so weak that the European Central Bank is likely to come up with some sort of a stimulus plan. Central bankers have been the key to the market for years, and they still are the only element that truly matters. If you want to find a negative, it is easy to point to the complacency.
Still, as usual, the bears continue to believe the market is on the brink of a major top. That is nothing new: Many people find it impossible to forego the market timing game. You can be certain that the bears are going to be talking about the poor seasonality of September and October, and the fact that the market is extended on light volume. These folks desperately want to be the hero that nails the exact minute the market rolls over and makes a top. They have been consistently been wrong, but that doesn't stop them. They are convinced that this time it really is going to be different -- but it never is.
Again, the smart move has been to not anticipate. If you have a bearish bias, you need to wait and react to negative price action rather than anticipate it. Strong markets are sticky to the upside, and this has definitely been a strong market.
Last week we saw some traditional holiday-style trading, and volume was extremely light. Still, there were pockets of speculation, and traders did quite well with individual stock-picking. There was strong underlying technical support in the major averages, and the race to put money to work continued. As this extended market goes ever higher, the fear of being left out continues to trump fear of being caught in a reversal. This has been the theme for a very long time, and it never seems to end as the bears keep wishing and hoping and praying that the doom they have been predicting is about to hit.
What works best in this market are some of the very old and tired clichés such as, "Don't fight the Fed" and, "The trend is your friend." If you stick with the wisdom of those aphorisms, you are on the right side of the market.
As for today's action, we're looking at a gap-up open, and it is always tough to be trusting such a move to start the week. That said, the tendency has been for quickly materializing support on any pullback. We haven't seen many quick reversals at all, as the dip buyers are watching and waiting to do their thing.
Analysts have bumped up targets on Apple (AAPL) and Tesla (TSLA) this morning, which is helping the mood, and Europe is strong as well. Buckle up and have a little extra caffeine this morning. It is time to go to work.