Rewarding Bad Behavior–The Market Can Be A Bad Teacher

Random Thoughts

The Ps (S&P 500) woke up in their rally out of a pullback, gaining over ¾% on the day. This action puts them at all-time highs after a nearly perfect textbook rally out of a pullback. Rarely does it shape up like this in an index but it sure is pretty when it does.

The Quack (Nasdaq) had a decent day too. It gained over 1/2%. This is enough to put it a multi-year highs. Some peeps thought I was cray cray when I said that the Quack would have to hit new highs for the year before I would began to get interested. Well, here we are. 1,000 points ago it looked a little ominous. This is a testament for the fact that a market can do whatever it wants.

The Rusty (IWM) also had a solid day, gaining nearly ¾%-again. So far it is pushing into overhead resistance like butter. Ideally, I’d like to see it and the Quack break out to new highs decisively and not look back for a while.

Yet again, things continue to improve.

Energies resumed their uptrend, gaining nearly 1% to close at 5-year plus highs.

Gold stocks continued to wake up. Again, they still appear to be putting in a bottom.

Ditto for Silver.

Foods and Utilities, 2 defensive areas that have lost some steam as of late, came back with a vengeance to close at all-time highs. This is one of the biggest days I have ever seen for Utilities. They acted more like a Biotech.

Speaking for Biotech, Biotech and other Tech that sold off hard back in the March/April slide have come back nicely. Ideally, you know me, I’d like to see some new highs for the year but this certainly is a good start.

Speaking of new highs, the Semis overall finished at new highs, albeit barely. Their solid breakout remains intact.

Although the Major and not so major Airs still look a little questionable, Transports overall put in a solid rally, gaining well over 1%. This action has them closing in on all-time highs. Like the Ps, they have had a nice rally out of a pullback.

So far, (again) for the most part, most sectors, like the overall market, remain in uptrends/near new highs and/or have only pulled back.

On Thursday’s, I wake up thinking about Big Dave’s The Week In Charts. And, this morning as I lay in bed I thought how this market has really rewarded bad behavior. The Quack and Rusty looked darned ominous just a few short weeks ago and now the Quack is right at multi-year highs and the Rusty is just one or two a big up days away from all-time highs. I’m going to flesh out how doing the right thing doesn’t always pay off but it is the thing to do. I also have a plethora of other stuff to talk about. If you’re not busy saving lives, repairing transmissions, training dogs, building buildings, or doing other great things then stop by. Bring your questions and your favorite stock picks.

So what do we do? Not much has changed with the exception of the fact that you probably do not want to fight the tape at this juncture. Once again, I’m still not seeing a whole lot of setups just yet. I suppose I should say “meaningful setups.” There are some stocks that are setting up but they have overhead supply. This could cap the potential gains. I am still seeing a few Gold stocks beginning to bottom out. This is especially true in the lower tiered more speculative issues. Therefore, continue to look for opportunities here. At the risk of preaching, as usual, take things on a setup by setup and a day-by-day basis. The Ps are at all-time highs. The Quack is at multi-year highs. And, the Rusty isn’t too far behind. Combine this with good breadth and it sure looks like we are in a get ready to get ready phase.

Futures are flat pre-market.

Best of luck with your trading today!

Dave