With the broader indices making multi-year highs, sans the Dow (blame CAT/CVX/IBM) in the middle of last week’s shortened trading week, it seems that international concerns have eased and thus temporarily removing some of the anxiety that has hung over the world markets.
With traders using any weakness and/or news geo-politically, Greek news and the Ukraine ceasefire to buy dips in the markets and with the fourth quarter earnings season in the US winding down, we at on a micro and macro view to get a better gauge of market direction, while always rotating out of our stock holdings predicated on relative strength and price action.
The Nasdaq (QQQ) broke out of a 10-week trading range and the Russell (IWM) continues to go higher, so with the Fed minutes out of the way in the US and little economic news coming out in the near future, we see continued volatility and most of these moves have come with the decline and instability of crude oil. Consolidation in the online travel sector (EXPE buying Orbitz) and never forgetting that AAPL takes on a life of its own to eclipse $700bln in market cap, investor confidence seems to be complacent.
We do keep in mind that AAPL takes up roughly 15% of the QQQs, but until the trend changes we stay long. We are all aware that as we continue to go higher as the SPX trades at a 17X multiple that there are more experts and opinions who try to pick a top in the markets, but one day doesn’t change a trend so we raise out stops on our indexes and play price moves in individual names (FOSL/GRMN/USO/GLD/CYBR) or whatever’s in play.
Last week was a quiet week and although the volatility is welcome, the volume is particularly muted, even on a relative scale, so we can’t help but use the old cliché, “never short a dull market,” and as the indices break out of a range the path of least resistance is up. We don’t encourage this type of trading, but look at it this way, the up moves on weak stocks have been more “painful” than the pullbacks on strong stocks on any particular day. There are many broken stocks that lead traders to think that a pullback or correction is inevitable …and it is.
But we are willing to give back some of our gains until the trend changes realizing that the markets might be a touch overbought on a short-term basis. Our traders aren’t trying to top tick the market because we all know how that goes, so we have our buy lists and our short lists, none of them being index related.
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