A Character Change In The Equity Markets?

I’ve been noticing the last several trading days that the market appears to be shrugging off bad news and going up on any little bit of good news.  When a rumor comes out or anything slightly positive, the short covering begins and up goes the market.  This is something we look for in stocks all the time.  A stock is down 30% from its highs because earnings are slowing, etc.  Then the company comes out with bad earnings the next quarter and says they are going to lay off several thousand workers.  Low and behold, the stock doesn’t move or even goes up.  This is what’s been happening in the equity markets the past two weeks.  

As a trader, I have to constantly monitor what’s driving the market up or down and is there a change in character.  This is bullish in the short-term that the market is acting this way. 

I haven’t made any moves based on this but it’s something I’m watching carefully.  As I mentioned yesterday, I don’t believe we’re at an extreme where we can safely buy stocks or safely sell them.   I still need evidence that there’s real demand or a real appetite to own stocks.  Right now, it’s not there.  It could start at any moment so it’s important to stay flexible and continue to protect yourself but don’t get so caught up in thinking one direction will last for months.

We’re not in a buy and hold market as we were in the 1990s.  Therefore, you constantly have to sniff around for good deals and then take profits when everyone else realizes it’s a good deal as well.  Eventually, and it may come after a washout, we’ll get to a point where we can buy broad baskets of stocks and make really good money without doing a lot of work.  We’re still a ways away from that.  But, it will come.


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March 2008
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