Dribble, Dribble

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MARKET WRAP UP 12/13/10

Although the major indices are making new 52 week highs on a daily basis, they are doing so in a very nonchalant way, dribbling higher. The areas of the market where the “hot money” is welcomed with arms wide open are growing smaller. While many traders may perceive the above analysis as an invitation to get aggressively short, I contend that strategy is flawed. Just because the indices have gone much higher in a relatively short amount of time, it does not necessarily mean that they will give most or all of it back. Thus, I am not convinced that the risk/reward profile is conducive for net shorts for anything more than a one or two day trade, if that.

In addition, the marquee names are still basing out (some have been doing so for seven weeks) with tight price candles and without heavy selling volume. These include: $AAPL $AMZN $BIDU $GOOG $PCLN. Although the consolidations in those stocks have been of the bullish variety, they still need to be monitored closely to see in which direction they eventually break.

In sum, a little skepticism about whether Santa Claus is coming this year could go a long way, literally and figuratively.

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