Thursday, July 29, 2010

$Cash Remains The Best Position in the $Market - Careful of the $Bull Trap

While I continue to monitor for changes in the trend, I believe that cash is the safest play.  As much as I'd like to believe the action in the leaders, I have alot of  suspicion and for good reason.

Most leaders have only been able to muster one good day since the follow through.  Many came on below average volume, while the one's that did have strong volume, failed to follow through with more volume over the following days.  Most breakouts have been retraced in almost all of the leaders and are on the verge of failing.  They need to hold or failure will be the next step.

As I noted in my Monday blog, the market had reached an area where failure or a shakeout was extremely likely.  It did not take to long after the post for the market to stall and reverse.

Right now it's best to continue to maintain watchlists and monitor leaders from a distance.  With next weeks big job report, there might just be too much uncertainty ahead of it.  I would not expect the market to do much ahead of the report.

With the slow summer trading ahead of us, the worst case scenario is for the market to keep drifting up in the face of low volume.  9 out of 10 times this has led to a major Bull Trap.  So let's get a nice quiet pullback over the summer and setup for something big in the fall.

If you're into shorting, there are now a good amount of setups that are ready to break if the market heads down.

Tuesday, July 27, 2010

Stay Patient... $Market Still Needs to Prove Itself

Market at a critical point.  At this level the market will need to prove that it can take out the June highs and hold them.  Historically this would be the area where the market starts to distribute for a second leg down or major shakeout.  So if you're still not long, you'll get your chance.  Right now it's hard to tell if this is a bear market rally or the real deal.  The many breakouts point to the latter, but there is still a question of volume on many of them.  Historically markets have presented multiple entries into a real bull.  So stay patient and don't over commit...just yet.  My models still have this market in the neutral zone.  That could change this weekend, but we will need to see the volume come in.  I would remain mostly in cash and cautious.

Wednesday, July 21, 2010

No Place Like $Cash

There is no reason to be a hero in the market.  Essentially the only reason to hold positions is to bet on the outcome of an earnings report.  Besides that, there are almost no good reasons to own stocks right now.  Everything is wide and loose and failing by the day.  Sellers are using good news to sell and bad news to sell.  Not the type of enviroment long positions thrive in.  Best to be patient and wait for the next opportunity to setup.

Tuesday, July 06, 2010

Patience - Not The Right Time To Buy Back In - Cash is Still King

As great as today may seem on the indexes, there isn't much follow through on the few leaders that have held up.  You'd like to see at least one or two stocks attempt to breakout and hold those breakout levels.  While this can still happen today, the market seems to be working off the excess sell off it experienced over the last two weeks (buy the rumor type buying ahead of the European bank stress tests).

After completing my markets model this weekend, I have no hope for a new rally beginning this week.  Too much damage has been done, and too few leaders are left in tact.  I would advise most to stay in cash or short if you know how, but do not initiate long positions.  There will be plenty of time when the time is right.

The downtrend in the Euro/Yen conversion still dominates the market.  Until we decouple we will have a hard time rallying.

For now just take a break but continue to work on your buy list.  It will be frustrating as a day like today will make you feel like you've missed something.  Don't worry, you haven't.  Another point of frustration will be when the stocks on your lists that look promising breakdown and you'll have to start from scratch.  That is all a part of a bear market.  The good news, if you keep up, when the timing is right, you will be prepared and the first one out of the gate.

There isn't much to write about these days so I will post when I feel something is relevant.  Hope everyone enjoyed the long weekend.

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