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MARKET WRAP UP 01/25/11
The dip-buyers showed some more resilience, as the S&P 500 went out on the highs today, up 0.03% to 1291. Despite the strong finish, the action was rather scattered and quite random today, as we saw several intraday whipsaws and an overall lack of leadership. In front of the State of the Union Address tonight, as well as an announcement from The Fed tomorrow, market players are predictably trying to game these macro/headline news stories.
From my vantage point, however, the bearish divergences in the small cap and transportation stocks relative to the senior indices are much more concerning. While many of the high beta names in the materials/energy complex that have been crushed the past few days may be ripe for a bounce, I am not seeing anywhere close to the amount of quality long swing trade setups that I would expect to find in a healthy market. Instead, I see some beaten down names that could see a quick relief rally.
It is often said in the poker world that good players frequently fold the best the hand. The reasoning behind that aphorism is derived from the idea that a good poker player is fully aware that, while he may indeed be holding the best hand, the risk/reward simply is not there to justify making a big bet based on that assumption. In other words, having the discipline to see the subtleties when deciding to take risk is crucial to avoid taking the big loss.
Applied to the current stock market, the bulls could easily deliver another explosive move higher in the coming days. However, with all of the churning at key support levels in many of the leading indices and sectors, combined with those bearish divergences mentioned above, I believe it is correct to fold my hand and wait for a better spot to risk capital.
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Damn, I thought I was going to find some kind of weird Braveheart analysis here.
You’ve caught on to the Trannies, I see. Don’t tell Fly.
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