Marketview: Stuck In The Middle — MRK, PFE, GS, BAC

There’s a sense that the market is standing at a crossroads.  On the one hand the market could decide to turn a blind eye to the the Eurozone.  If so, optimism becomes self reinforcing, the glass looks half full, and we can catch a bid and start breaking highs.  On the other hand we choose the path of the darkside and spend the next few years doing “the Grantham.”

We’re coiling for a big move in one way or the other and you can make a case for both directions.  How does this play out?  If sentiment stays negative but price stays relatively unchanged chances are we’re building a base for a slow plodding bull run that will last a long time.  If the overhang of sentiment and negativity becomes overwhelming and we break lower, expect violence and dire conditions to prevail.  The break will come in the first quarter of 2012, if ever.  Currently the higher probability outcome is the latter.

Being smack dab in the middle of the range for the year is upsetting for practically everyone.  No one gets to proclaim victory on the year.  Furthermore, we’ve been dealing with these ginormous frustrating trading ranges punctuated by false breakouts and end-of-world negativity.  I’ll remember 2011 for being a year of profound personal change, professional progress, and absolutely miserable trading.  I’ve never not wanted to go to work before this year.

Not much on deck for the rest of the year.  Main thing to look forward to is the first round of 2012 funding requirements for Euro zone allstars.

Winners: $CMCSA, $VZ, $MRK, $PFE, $AMGN, $MO, $BMY. $ETR

Losers: $GS, $MS, $BAC, $SLB, $BHI, $CAT, $AA, $FCX

A couple things stick out to me this week while looking at from the usual risk on risk off trade.  The risk on trade (the losers this week) is in danger of breaking support.  Further weakness in oil services, financials, and basic materials could signal dragging the market towards the October lows.  This is happening while utilities, healthcare, and consumer staples are breaking into some highs.  The market has proven momentum-less lately, so take these range breaks with a big grain of salt.  Now, off to do some more Christmas shopping!




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