One of the biggest challenges for market timers is that strong markets tend to stay sticky to the upside. They don't just suddenly roll over and go straight down unless there is some surprise news. Markets that have strong momentum create underlying support. There is a large group of people who have missed the move and when they finally have an opportunity to buy a pullback, they are quick to act.
Despite the bounce in the indices, breadth is only running about 3,600 gainers to 3,000 decliners. For most of this rally, we have had very strong breadth as small-caps have been leading. It is a switch to see the internals weaken a bit.
Although the action is looking better at the moment, I've not been able to put any meaningful amount of cash back to work. The rebound in steel names such as U.S. Steel (X) , Steel Dynamics (STLD) and AK Steel (AKS) after downgrades today doesn't do much as far as consolidation. The charts are still extended and, in my view, don't offer good entry points here.
I'm now underinvested and that never feels good when the indices are in the green, but I'm only going to make new buys if I feel entry points are not extended. One example of a stock that has based and offers a fairly low risk entry is Exelixis (EXEL) . It is working on a move to a new closing high and has seen a good volume pattern over the past couple of weeks.
If I can find my individual setups, I'll buy them, but I don't see many at the moment.
