Nothing negates a failed auction quite like a slow and sideways trade right at the swing high. The quiet manner by which the market lingers at swing high suggests two things. First, the market is not sharply rejecting higher prices. Instead we are building acceptance at these prices. Second, the slow action suggests the market might be waiting for new information before moving elsewhere.
Under the hood of the market, the internals are showing an interesting rotation to start the week. Most interesting is today’s weakness in retail which has become a widely discussed area expecting some positive rotation. It is a simple trade to understand and started showing early signs of working last week. However, one must keep an open mind that the whole idea could take some heat before ultimately playing out into Thanksgiving. Shares in EXPR, ANF, JCP, and AEO are showing signs of relative weakness and LULU reversed its early pop. On the flip side we can see rotation into risk especially in security software, China names, and solar.
Overall the grind higher makes it tough to short, especially individual stocks who could squeeze at any moment. And on the other side, taking longs requires proper risk profiles to your trades and overall book in case we see a leg down quickly materialize.
The top three trades I am stalking into the close are YELP, DANG, and SCOK. All long ideas, especially if bulls sustain trade above the zone from the daily mid (4163.75) to opening swing high (4161.25).Comments »