For the third day in a row, the S&P 500 rallies more than 10 points in the first 20 minutes of trading. There is obviously some automatic "dip buying" taking place now. Once that patterns starts to emerge it feeds on itself as others jump in and try to catch a ride.
Since the market hit bottom on Dec. 24 we have had 15 trading sessions prior to today. On 13 of those sessions, the S&P 500 has closed higher than it opened and it is now on a run of nine in a row. By any definition that is an uptrend and we all know the old saying "the trend is your friend."
Many traders, including me, have been looking for a short-side trade as the indices become more extended and head into resistance levels, but the key to entry is waiting for a change in market character. There needs to be some weak closes and some closes that are below the open. Only after that occurs will momentum start to shift.
It is interesting Thursday that the market has shrugged off the poor report from Morgan Stanley (MS) after celebrating the good earnings from Goldman Sachs (GS) Wednesday. That tells us that market players still don't want to embrace a negative narrative.
Netflix (NFLX) reports Thursday night and it will be very instructive to see how the market regards that news. Will it be forgiving of a bad report or dump a stock that has had a big recent run? Will it sell a good report or celebrate it? Whatever happens will give us some further clues as to whether the character of the market might shift.
I have been feeling frustrated recently as I've not been finding the sort of stock-picking that I prefer. Obviously, the best thing to do is to stay patient and wait for conditions to change. However, it still has an impact especially as there are so many market players now celebrating their belief that this market is going to keep running straight up.