Quote from Caliber trader: " WHAT DO YOU THINK? I think you are pretty intelligent. That's what i think.
I did not like the rally from the start this morning. Once I could see that it wasn't going to hold, I made the decision to move to cash. Even the bounce this afternoon was fishy as volume decelerated from this morning. There are several problems: 1. The market is uncertain about everything. 2. The markets rallied the 2 - 5% and stalled at their 50DMA as I thought they would. 3. Powerful volume breakouts failed to make similar price moves. (I know it's one week into a rally, but at least some usually have powerful price moves.) 4. Other Breakouts were weak on volume or stalling. 5. With such a strong opening and no breakouts, that's a problem. 6. Leadership in the market is thin. The major market averages will most likely try and test the 50dma ( 1- 2% higher from here)before going lower. Considering tomorrow is window dressing (quarter end) and early next week is a Jewish holiday, volume should remain light and the bulls should have their way. After that, I would get out of the sellers way. If you're still long and are nervous, my advice is cash, no need to wait for the breakdown, or at least cut your positions in half. Never stay in a position when you're not sure what to do, it just leads to bad decisions. If you're a trader, look for shorts, next week should be the optimal time to start shorting (by mid week the latest). My short setups all make me feel that the market just needs to stay up for another 2 - 3 days, then they will be perfect (aaaahhh, nothing ever perfect in the market). Don't stop looking for longs either, we havenât rolled over yet, the rally may still find it's footing, but I doubt it. PS I'll flip sides if I have to!!!
Look at the number of stocks with reasonable to sound fundamentals breaking out to new highs (not all new highs). SMSI/VIP/AER are good examples. Then looks at the behavior of the markets and the two will correlate very closely. I could go deeper, but I would be here for hours. But I'll be glad to elaborate further if you have questions. Here is a list of stocks I sold yesterday, that today, even with the rally, just refuse to move higher: AER NYX SLP SMSI VIP In a strong market, some may be negative, but not all.
How do you define sound fundamentals? Most of the five you mentioned had moved up in the days prior to your post (unlike the indices). Wouldnt some rest be just normal then? Does the recent action change your opinion at all? (some have rallied)
They do deserve a break, the problem is, the type of volume they traded on their breakouts you would have expected more of a follow through before the rest. The other problem, other breakouts just snoozed or failed to materialize. I like to see an army advancing not just the special forces, they are limited on firepower. As for fundamentals, I want to see 20% plus growth in last two quarters in earnings and sales. My opinion has not changed from bearish. I do have some setups to the long side, just not enough. You would expect a day like yesterday, after a rest from the follow through day, to produce powerful breakouts and it did not. Something is wrong in this market. Now that we got the second rally over the 50dma on the averages, it's time to look for the shorts. By the way I hate oil and oil stocks. With such an advance in oil most oil stocks just slept through the move. Now that Iran has been resolved, oil and oil stock start to breakdown again.