AM: 20,000 views!!!

AM Update

This morning I logged my twenty-thousandth view and I want to thank everyone for their enthusiasm and positive feedback over the last few months.  I am glad so many people find value in my analysis and I am always happy to share.  But the real benefit for me is these posts force me to be be thoughtful, analytical, and rational in my approach to the market and it has taken my personal trading to the next level.  Most people with teaching experience know the best way to learn something is to teach it, and I want to thank everyone for being a willing audience and allowing both of us to grow through this experience.

MARKET BEHAVIOR

Stocks continue trading around the 1460 level.  Reversals from extreme overbought conditions tend to happen within a couple of days, so barring a breakdown this afternoon, the market is firming up around these new levels and setting the stage for a continuation.  Monday will be the real test of this level and if we hold, expect higher prices, not lower.

MARKET SENTIMENT

Predicting the market is easy, the hard part is correctly timing those predictions.  Markets always pullback, but all the money is made in figuring out when they will pullback. There are a lot of traders afraid of this market and calling for an imminent pullback,  but we still haven’t seen evidence of that happening.  The longer we hold up in the face of this bearish sentiment, the more bullish it is for stocks.

TRADING OPPORTUNITIES

Expected Outcome:
The longer we hold at these levels, the more supportive it is for a continuation.  Maybe that is just one last short-squeeze, or maybe it is another leg higher.  But either way, this is becoming a dangerous place to be short the market.  We will eventually pullback, but the longer we hold at 1460, the less likely an imminent pullback from this level becomes.

Alternate Outcome
Rock-steady value buyers who purchased shares during the height of Fiscal Cliff pessimism are locking in profits and selling to more emotional traders who chase the market.  This is building a fragile foundation of owners who will panic at the first signs of weakness and negative news.  We might not yet have a critical mass of flighty owners in the markets yet, but their numbers are growing by the days and we shouldn’t expect the rock solid support we found near 1400.

INDIVIDUAL STOCKS

AAPL is plunging 2% over alleged market share concerns.  But in reality it is just some selling after a big run.  The stock closed the gap and is hopefully building a foundation to continue higher.  As we discussed earlier, AAPL is becoming a trading stock and as expected it hit some resistance at its 50dma.  But so far nothing is wrong with the stock and the only people who have to worry are those that chased it up at $550.  This further reinforces the approach of buying when you don’t want to buy and selling when you don’t want to sell.  It was tough to buy when the stock retreated to $500 and it was tough to let go after it surged to $550.

Stay safe