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MARKET WRAP UP 09/13/10
Stocks turned in another steady move higher today, while the pullback that everyone wants to see is missing in action. With the S&P 500 closing up 1.11% to 1121, the midday selloff turned out to be a terrific intraday buying opportunity. Volume was nothing to speak of, while breadth was strong. Two of the weaker areas of late, the small caps and technology sector (namely the semiconductors) turned in impressive days, as they played catch up to the broad market. Moreover, the emerging markets ETF broke out above a multi-month symmetrical triangle today. If that breakout holds in the coming days, it will be tough to argue against the idea that global risk appetite is now back in vogue.
While many charts could use a healthy consolidation period, there appear to be too many traders either bearish, or desperately hoping for a pullback so they can load up longs, for it to imminently materialize. As he is prone to do, Mr. Market will do that which frustrates the greatest amount of traders. Ironically, the same traders who are aggressively shorting this move because it is an unconvincing low volume drift higher, are likely the same ones providing the jet fuel to propel it even further as they get squeezed like the fruit in a Jack LaLanne infomercial. One thing for sure in this market is that if you insist on aggressively shorting the move up to the top end of the multi-month trading range, you are going to need a bigger stop.
Looking at the updated daily charts of the leading indices and sectors, seen below, there is still more room for the bulls to take us higher before we break the upper limits of the multi-month trading range. Beyond that, even a marginal break above the range would not be out of the question. In situations like this, you can either choose to aggressively chase prices higher, you can fight the tape and boldly go short, or you can buttress your exposure to the market with an outsized cash position. I believe that the latter strategy is the correct way to go here. In essence, I am willing to play along with the melt-up, but will do so with an Exit Row seat, and one eye on the emergency brakes.
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Nice post.
I would point out that on EEM, if you just draw a straight line from May, it is still within the range, not broken out at all.
Down later this week though, everything, and hard and fast. This shit won’t hold up.
The line “ya gonna need a bigger boat” was not in the script but spilt out of the actor’s mouth during filming and kept in the final movie cut.
ROVI has trouble to stay above $45.