MARKET WRAP UP 06/15/10
The market shook off more bad news today, as the S&P 500 closed up 2.35% to finish at 1115. During the past several trading sessions, we have seen opening gains that were aggressively faded into the closing bell. One would think that type of action would be followed up with a sharp reversal to the downside. However, that never came to be. Instead, the bulls have squeezed everything, and everyone, higher. In sum, we are in the midst of another hated rally.
The reason why this kind of rally is so hated is because there have not been any easy entry points. Unless you timed the bottom perfectly (or went to cash as SPYder Crusher and I did), you got crushed on the way down during the correction. Then, when we reversed on a dime and headed higher, we went straight up, until it looked like we were going to fall apart yet again. When we did not fall apart again, the bears frantically scrambled to cover their shorts, and the underinvested traders scurried about to find some longs.
As the updated and annotated daily chart of the S&P 500 shows, we took out some key levels of resistance today (see below).
My best strategy right now is to selectively deploy my cash position back into the market. The leading growth stocks are performing well, and many others are setting up nicely. As I noted in an earlier post, I bought four longs today: $APKT $LULU $CRM and $IAG. Note that I still have an 80% cash position. At this point, I am putting out some feelers into the market. Should this rally turn out to be a vicious bull trap, I will not have paid too dear a price.
However, I would be remiss if I ignored the fact that so many traders are distrustful of this rally. When perma bulls like Jim Cramer are providing excuse after excuse for why this rally is not legitimate, I am inclined to add more long exposure. I am still looking for a light pullback–even if it is just half a day– to add more longs, but then again so are many other traders.
Thus, my game plan now is to pounce on the names on my watchlist in the event of an orderly consolidation period, but to take a pass if the market continues to run away from me to the upside.
UPDATE: More examples of The PPT magic being shown to befuddled third tier toilet bloggers.
[youtube:http://www.youtube.com/watch?v=AYxu_MQSTTY 450 300]
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