Marketview: Attack of the Doji

• Posted by DynamicHedge
• on February 11th, 2012

Warning signs are creeping into the market ever so slowly — but a doji candlestick formation is not one of them.  Markets on a run like this don’t just crash, they infuriate everyone with a long and painful topping process.  I expect this doji bar to get will be trampled and sent to the doji graveyard along with hundreds of other invalidated candlestick signals.

There are a lot of people yelling at the top of their lungs that “Everyone is BULLISH.”  While I agree that sentiment is getting stretched, last time I checked sentiment can stay quite bullish during bull markets.  Don’t be bearish just because it’s cool to be a contrarian.  That shit COIF.  If you think people are bullish now, imagine the buying frenzy that would occur if suddenly the S&P was trading at 1275.  Like it or not, the market tone has changed.  It’s okay to be prudent, just know that pullbacks will be bought aggressively.

Some minor warning signs include the bellwether $FCX having a terrible week along with most of the materials sector.  Rails and transports also had a very poor showing in general.  Low quality stocks continue to perform well which is always worrisome.  On the positive side, technology continues to lead the market and move higher via AAPL pulling up the entire XLK up by its hair.  Yes, AMZN and ORCL stumbled this week, but overall tech is still strong.

I will not get too concerned about the transports and the rising tide lifting all the crappy boats until there is something to actually be concerned with.  For example, if the S&P is making highs above 1370 and transports are selling off, or if the MAMO index turns, or if the market starts actually reacting to bad news, then I’ll start shifting gears.  As annoying as it is, the market is objectively trending higher.

Winners: $AAPL, $V, $DIS, $PM, $NKE, $PG, $BAC, $LMT, $UTX

Losers: $MON, $AA, $FCX, $NSC, $UNP, $MS, $GS, BK

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