What is fascinating about this market is how easily it can ignore any and all negatives. If you are so inclined, it is very easy to formulate a bearish argument, but the problem is that no matter how logical or compelling the thesis may be, there are too many folks who just don't care. They see that nothing much can hurt this market so their only real worry is to not be left out.
Fear of being left out or of having poor relative performance is what drives this market. Many of the bulls are reluctant to be aggressive but they have little choice if they want to keep pace with this market. If you keep your focus on what can go right rather than what could go wrong, you are better off, but it can be tough to stay so unwavering positive.
What is interesting now is that technically the SPDR S&P 500 (SPY) is right back to the gap that was formed in mid-August. If that is filled, it is going to be tough to keep this market from going to new highs. Right now, it doesn't look like the bulls are worried at all about old-fashioned concepts such as overhead resistance.
The way to deal with this market is to stay positive. It may not feel right, especially if you consider all the things that could go wrong, but if you want to make money, you have little choice. >p/>Have a good evening. I'll see you tomorrow.
Sept. 09, 2013 | 1:05 PM EDT
The Main Theme of 2013
- Underinvested bulls struggling to put money to work.
The market continues to chug along as if it doesn't have a worry in the world. The latest news on Syria keeps bringing in buyers and the economic news is just slow enough to make the Fed hesitate about tapering.
While there is plenty of green on the screens and quite a few bulls talking about how fantastic this market is acting, it is becoming increasingly difficult to put more cash to work. If there has been one primary theme in this market in 2013 it has been underinvested bulls struggling to put money to work. The market consistently seems to catch folks by surprise and with too much cash.
Some market players, especially the momentum types, have no problem buying extended stocks that are making new highs, but many fund managers have been trained to buy only weakness. The methodology is to identify favorite stocks and then try to buy them at lower prices so that the cost basis is as low as possible. If a stock is a good value, buying it cheaper will make money.
Unfortunately, that approach has been very tough, which is probably the main reason that so many fund managers are underperforming this year. "Buy the dips and sell the rips" is the mantra of many fund managers, but with so few dips and the inclination of stocks to go from overbought to even more overbought, it has been hard to implement.
I have a few things on my list for potential buys into the close but I've been doing more selling than buying today, which is more a function of few good setups rather than a poor market.
It always makes me shake my head when I hear people say what a great market it is, but when you ask them what they are buying, they say nothing. To me a great market is one where you can put money to work. It is nice when all your holdings are up but if there aren't many suitable new buys, maybe that is warning sign.
Sept. 09, 2013 | 10:25 AM EDT
Focused on the Positive
- Dwelling on the negatives proves to be the wrong move again.
Once again, dwelling on potential negatives like Syria and tapering proves to be the wrong move. In this market, the key to success is looking for reasons to be positive. Instead of focusing on what can go wrong, we need to focus on what can go right because there is an appetite for stocks that isn't going away.
Breadth is very strong at better than 3-to-1 positive, and the only down sector is precious metals. There is chasing of high-momentum names, as well China-related stocks, homebuilders, oil and steel.
This market frustrates the underinvested bulls who never get an opportunity to put money to work on pullbacks and consolidations. The only way to get in is to pay up, and that produces a huge supply of bulls who will provide excellent underlying support.
My stock of the week, China's Bitauto Holdings (BITA), is off to a good start. Two other China names I've mentioned lately, NQ Mobile (NQ) and JinkoSolar (JKS) are doing well. Potash (POT) is finally turning up after building a decent base, and I may look to add that later in the day. Facebook (FB), Biotelemetry (BEAT) and Century Casinos (CNTY) are plugging along.
The key to success is to keep beating the bushes looking for new buys. Worrying about big-picture negatives is great for the media but a major handicap if you are looking to make money.
Sept. 09, 2013 | 8:28 AM EDT
There's Hot Money Out There
- And it's looking for a place to go.
Look beneath the surface; let not the several quality of a thing nor its worth escape thee. --Marcus Aurelius
The market faces an interesting mix of fundamental challenges this week, but with continued technical support and speculative interest. While charts of the major indices don't look great as they deal with key resistant levels, there is very good action under the surface. There's money out that that wants in, and the buyers are not going away.
It isn't hard to make a bearish argument based on the major indices, particularly the DJIA, but the indices are hiding impressive action. Big-cap momentum stocks like Facebook (FB), Yelp (YELP) and LinkedIn (LNKD) continue to attract attention while one old leader, Apple (AAPL), stages a comeback.
Market players have learned that it is a mistake to underestimate the ability of the market to bounce strongly when the technical pattern of the indices looks problematic. In fact, the pattern of buying the indices when they look vulnerable to a failed bounce has worked so consistently that it is almost a self-fulfilling prophecy. Rather than fear a low-volume bounce into resistance, we should buy them and expect them to continue unabated.
The big question is whether Syria or concerns about tapering are going to give the bears traction. We have had bouts of selling as the Syria issue percolates, but I don't see it as something that is going to have a long-term impact. In fact, I will view downside caused by an attack as a buying opportunity. It is not going to be a long, drawn-out battle, although there will be plenty of diplomatic drama.
Tapering is the other major issue the bears are relying on to bring this market down, but the jobs news Friday was weak enough to suppress some tapering fears. There is hope that the Fed will wait for more data or taper at a slower pace.
What makes me most bullish about this market is the action in individual stocks. If you don't look at the indices and just focus on stocks with good relative strength, you would have little clue that there is anything wrong with this market. There is hot money out there looking for a place to go. It does not seem fearful or worried at all.
The bulls are in control this morning, and Monday morning strength has a way of building even, if there is flipping into to start the week. Stay focused on stock-picking, and that should help you navigate effectively.