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“I have been through some terrible things in my life, some of which actually happened.” -Mark Twain
One phenomenon you expect to see during secular bear markets, as the Nasdaq has clearly been in since 2000, is that being “perma-cautous” on the market starts to become in vogue just as pounding the table as a raging bull was in the 1990’s. Certainly, given the overall structure of the market since 2000 being a perma-bull has been quite painful at times, indeed. However, as we have seen largely since March 2009, even during a secular bear the dedicated shorts have looked more like the bad news bears than the 1985 Chicago Bears. Despite that, observing social media every day there is a certain badge of honor I see amongst traders regarding who can appear to be the most bearish or the most cautious.
Applied to the current market, we continue to see mild consolidation on the major averages, with dozens if not hundreds of stocks either breaking higher or basing tightly. Moreover, we still have rising daily and weekly chart moving averages on the senior indices. And yet, the perceived dangers in the market seem to be on many traders’ minds. While perception may be reality for most, in the market the price action is the ultimate reality. If the semiconductor weakness truly is capable of bringing down all stocks, then we will see signs soon.
However, those signs have not yet appeared, as the notion of a market of stocks and a stock picker’s market has been conveniently discarded by the perma-cautious types. To be sure, I can go long stretches during corrective periods where I am largely in cash. When the time is right, though, I have little problem striking with aggression.
This morning, we are off slightly on the indices with the transports and financials showing relative strength. As noted above, the focus should be on finding the best technical setups that are working well, as we do inside 12631. Until that ceases to work, individual stock selection matters most in this market.
