Marketview: Risk-on Momentum Continues

The market opened on a gap up and closed at the high of the week.  This is not bear market behavior.  The market is trying to speak to you ever so softly through price action.  This is exactly what sentiment felt like in late 2009 and mid 2010.  There were a million ways to spin the decline of modern civilization, but the market kept going up.  This is the same market that no one believes in.  Earnings this week were meh at best (technical term) and the market still printed higher.

I think people find it hard to believe in higher prices for equities because it means that they’re somehow turning their back the facts.  Facts like: Europe is screwed, the world is choking on debt, Goldman Sachs is evil, Social IPOs are scams, China is in for a hard landing, etc, etc.  If you intellectualize every negative in the world you’d paralyze in fear.  What I learned back in 2009 and 2010 was that you don’t get paid to intellectualize problems, you get paid to interpret the intersection of reality and behavior.  My interpretation is that there will be buyers to support the next pullback.

Maybe I’m conditioned to expect the upside to dominate and this time is different.  There is a very real possibility that I’m dead wrong about this bullish interpretation.  We are technically overbought and in need of a healthy correction.  If the market loses its footing I’ll be watching credit spreads like a hawk ready to change my posture and outlook on a dime.  If conditions change, I will change my opinion.

Winners: $MS, $BAC, $GS, $SLB, $HAL, $XRX, $TXN, $DELL, $IBM, $ORCL

I’ve said for a while that the rally to believe in will be led by Tech.  Check out the stocks leading the charge this week.  Look who else is showing interest in these names.


Losers: $ETR, $AEP, $UNH, $BMY $JNJ, $HNZ, $PM, $MO, $V

Read also: Market Reactions to ECB Meeting (Dynamic Hedge)

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