Marketview: More Small Decisions


New highs for most indices and the S&P 500 closed virtually at the high tick of the week. This is bullish price action. Not much has changed in slow summer trade. Our models are still bullish overall, and Bernanke reassured the market once again that the Fed would be very accommodative. Financials are smashing earnings while large-cap tech is getting smashed (see: Bubble Exchange: Technology vs Financials).

As I see it, there are two paths for this market. It could shift gears into full rocket mode or sputter out at the 1700 figure and back fill. The recent tone has been to test liquidity on the upside and then aggressively back fill (see: Why I Hate Breakouts). The potential is there for higher prices, but this market is all about booking gains and cycling into the next opportunity. Making more small decisions when times are good saves you a lot of pain when times are bad. Small decisions keep you nimble and makes it more likely to act on big decisions in times of stress. Sell a few calls, ratchet up a stop on a quarter of a position, buy some cheap index puts. I am not bearish, but if the market is starting to feel complacent, then you shouldn’t be.

Market rotation was a bit bizarre this week. Energy, industrials, and utilities led while technology, consumer staples, and consumer discretionary lagged. Large cap technology is officially the worst sector going. The worst sectors today are tomorrow’s big winners, but they tend to stay shitty for longer than you think. Next week is $AAPL earnings. We’ll see if they keep the trend of tech earnings misses.

Watch market breadth. It should break out to new highs sooner than later in order to keep the momentum going.


MAMOx indicator is still bullish:


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