A Little R&R: Risk/Reward

chessNwine Wed Feb 2, 2011 5:51pm EST 2 Comments

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MARKET WRAP UP 02/02/11

The market is trying to prove its resilience once again, despite a multitude of reasons to be cautious here. Here are some of them:

While the S&P 500 is right at 52 week highs, the transportation stocks (IYT or DJT) are slicing down through their respective 50 day moving average.
The technology and small cap stocks (QQQQ and IWM) failed to “confirm” the S&P’s fresh 52 week high by printing one of their one.
FCX GLD and SLV are sporting weak daily charts, struggling at important price levels after bouncing back up to them.
There is a lack of clear leadership. Instead, traders are simply scrambling from pocket to pocket of perceived momentum.
Sentiment is becoming a bit too complacent for my taste. The non-financial media is espousing the idea that all is well with the market because the Dow broke above 12,000 and the S&P 1300.

Hence, evaluating one’s own threshold for risk is key at times like this. The above evidence is not enough to become aggressively short in the face of a seemingly inevitable melt-up. However, is it a good reason to tighten up.

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