Market Presents Traders With 2 Big Challenges

 | Sep 12, 2017 | 1:25 PM EDT
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Stock quotes in this article:

QQQ

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ttd

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extr

The indices, with the exception of the Nasdaq-100 ETF (QQQ) , are lingering around the highs of the day, but this market action is deceptively difficult to trade. This is not a market where you can just throw money at the action and feel confident that the momentum will bail you out.

Breadth is very good at around 4,200 gainers to 2,400 decliners and there are over 600 stocks hitting new 12-month highs today, but what is leading today is different than what was leading yesterday. Yesterday some of the semiconductors, biotechnology and big-cap names were leading. Today it's more financials and a smattering of other things, such as China-related stocks and oil services.

Traders have been presented with two major challenges. First, most of the gains have come overnight. If you weren't long already, there wasn't much of an opportunity to add exposure. A secondary problem is that many stocks are extended and entry points are problematic. Most of my favorite names like The Trade Desk (TTD) or Extreme Networks (EXTR) don't offer ideal entries at this point. Either they need to consolidate or pull back before it makes sense to be more aggressive.

Rotational action, big morning gaps and technically extended charts are the obstacles that the bulls face here. That isn't nearly as difficult as the directional obstacle the bears are facing, but it isn't as easy as it looks when you see the S&P 500 up 1.38% since Friday's close.

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