MARKET WRAP UP 06/15/10
The market shook off more bad news today, as the S&P 500 closed up 2.35% to finish at 1115. During the past several trading sessions, we have seen opening gains that were aggressively faded into the closing bell. One would think that type of action would be followed up with a sharp reversal to the downside. However, that never came to be. Instead, the bulls have squeezed everything, and everyone, higher. In sum, we are in the midst of another hated rally.
The reason why this kind of rally is so hated is because there have not been any easy entry points. Unless you timed the bottom perfectly (or went to cash as SPYder Crusher and I did), you got crushed on the way down during the correction. Then, when we reversed on a dime and headed higher, we went straight up, until it looked like we were going to fall apart yet again. When we did not fall apart again, the bears frantically scrambled to cover their shorts, and the underinvested traders scurried about to find some longs.
As the updated and annotated daily chart of the S&P 500 shows, we took out some key levels of resistance today (see below).
My best strategy right now is to selectively deploy my cash position back into the market. The leading growth stocks are performing well, and many others are setting up nicely. As I noted in an earlier post, I bought four longs today: $APKT $LULU $CRM and $IAG. Note that I still have an 80% cash position. At this point, I am putting out some feelers into the market. Should this rally turn out to be a vicious bull trap, I will not have paid too dear a price.
However, I would be remiss if I ignored the fact that so many traders are distrustful of this rally. When perma bulls like Jim Cramer are providing excuse after excuse for why this rally is not legitimate, I am inclined to add more long exposure. I am still looking for a light pullback–even if it is just half a day– to add more longs, but then again so are many other traders.
Thus, my game plan now is to pounce on the names on my watchlist in the event of an orderly consolidation period, but to take a pass if the market continues to run away from me to the upside.
UPDATE: More examples of The PPT magic being shown to befuddled third tier toilet bloggers.
[youtube:http://www.youtube.com/watch?v=AYxu_MQSTTY 450 300]
Yeah, today’s a big day for the bulls. Got burned a little on some shorts I had yesterday, but oh well, that’s what happens… it does look like we have at least 10 or 15 points up before reversing….. but who knows.
Thanks for the analysis as always.
Could be. Thanks for always reading.
Put my rally hat on June 7 am based on the PPT. No hated rally here.
(BTW, love your blog.)
Thanks–and well played for nailing June 7!
as always, CnW, excellent write up. You are my brother from a different mother, indeud.
I do disagree with this point though –
“The reason why this kind of rally is so hated is because there have not been any easy entry points. Unless you timed the bottom perfectly, you got crushed on the way down during the correction.”
One: We both got out a the top, and sat out the whole thing, and never bottom picked.
Two: We both had essentially perfect entries back in to whatever stocks we wanted.
So it really wasn’t as drastic (for us).
Point of this to anyone else reading is that we have a method. Nothing is perfect, but I trust it, and it does me well. Same for you.
Having a method means I don’t view the data set as hated, don’t look at entries as easy or hard, etc. I just wait until it’s time for me to act and then I do, in a consistent way.
I agree with you. I think I was too vague when I wrote that, but we are definitely on the same page on all of those points.
Great working with you!
agreud.
I didn’t read it as vague so much as you describing a good call as harder to make for you than it was. Fuck that. Be like, “I saw what I saw, did my thangs, sat this bitch out, and thus bolstered my confidence in both myself, and the ability to plan my trades and trade my plans.”
That’s why I programmed everything green/red. All I have to do is glance.
One thing I learned from Fly outside of the re-education camp he made us all go to was you need to relish in your win no matter the size. That call was a big win for anyone who listened (most importantly you).
so cheers!
apparently my comment is awaiting moderation…
Thanks–points taken. Indeud.
Great post, cNw… S_C comments good also…
gulped down some KOG ASX DGP after SPY crossed the 200 today for a quick swing
in this environment, will watch ’em like a hawk, and add positions stock by stock rather than too close a focus on the indexes…. not going to bet the farm here!!!
Chess and Danny – I was afraid I would see this post today. Trying to be arty-smarty with new found PPT wealth, and I leaned too hard off of hedged. Both of you played your hands nicely. Well done sirs.
thanks Yogi
Chess,
Followed you in with 25% of port. Bought APKT like you. And also, ARUN, NTAP, and AKAM. I bought a one x position in all, but doubled it in ARUN because of the stock’s break to new highs today.
Testing the waters too, and hoping for a follow-through day in the s&p after some consolidation.
Great post as always and good to know that there are pros like you and Danny who look at the market pretty much like I do.
Buy rosoe hats from louisiana, reversable and stylin, in a coon ass way. Not bad in the heat as well, i own 4 now, use em at work. Very comfortable!
lol nice