Biggest Bullish Catalyst

End of Day Update:

It was another meaningless day for the market as it remains stuck in neutral. The S&P500 finished inside a 20-point range for the seventh consecutive day. While some claim this is boring, listless trade. Reality is a lot of passion is hiding under the surface. Given the headlines out of Europe, Asia, Fed, and our economy, plus stocks at record levels, there are few traders yawning from boredom. Most are passionately arguing their opinion that this market is either overvalued and on the verge of crashing, or in the early stages of another 90’s style bull run. The market isn’t idling in neutral because nothing interesting is going on, it is stuck because bulls and bear are pulling so hard from both ends.

If we listed of all the reasons this market should selloff, it would take several sheets of paper. But I suspect most would struggle coming up with more than a handful of fundamental drivers for us to continue rallying. Yet here we are at record highs. For many investors, this obvious skew is all the reason they needed to dump their stocks ahead of the imminent correction. But as the contrarian, I’m left wondering why this market is so strong when the news is so obviously bad. The thing most people forget is markets don’t trade news, fundamentals, or technicals, they trade opinions. No matter how bad the news, if we run out of sellers, prices rally. Opposite is true when we run out of buyers. Trade people, not news.

A lot of the reasons we keep stalling above 2,120 is because those with cash are afraid of Greece dropping the Euro. We’ve been conditioned by years of articles about what a disaster that would be. But here’s the thing, markets are only vulnerable to the unknown. Since every wannabe investor hanging out in Starbucks is talking about what’s going on in Greece, we can safely ignore it. That doesn’t mean these events won’t drive near-term volatility, but that we can take comfort in knowing it won’t cause the next market meltdown because there are so few left to sell the “surprise” headline.

I’ve been constructive on this market for a while, but stalling near the highs for over a month is a concern. Those with cash are not in a mood to buy because they are afraid of Greece, rate hikes, and a sluggish economy. But clouds of uncertainty always dissipate and the best time to buy is when everyone is most uneasy. The biggest bullish catalyst in front of us, and yes I said bullish, is Europe finally kicking Greece out of the Euro. By the time traders realize Greece is the catastrophe that never was, it will be too late to buy the dip and all those reluctant buyers will be forced to chase this market higher. Long-term investors should ignore all the noise, but more nimble traders can make money buying discounted shares from panicked owners if prices stumble in the near-term.

Individual Stocks:

$AAPL – Lacking any headlines, AAPL is mirroring the indexes. There is a chance we could see a small pullback next week after Apple fails to announce anything new and exciting at its developers conference. But the disappointment will likely be short-lived.

$EBAY – It was a flat day for EBAY as it continues digesting the recent breakout. But the longer we hold above the breakout, the more likely it will stick and continue higher once all the new-high profit-taking is behind us.

$ALGN – Added nicely to its recent breakout. The big psychological and technical test will come when it runs up against $65, a level it failed to overcome at the start of the year. While we should expect a pause, or even pullback, as many sell and short the highs, there is no reason to join the selling as long as we stay above the buy-point.

$FEYE – Keeps edging higher, but this one has a longer road to hoe since it is well off the highs. It will continue to encounter selling pressure from regretful owners as it climbs higher, but this recent breakout pushed us clear of the post-IPO consolidation and all those buyers are now sitting on profits. While we are still 50% off the highs, most owners are sitting on profits and more comfortable waiting for higher prices.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN