On Wednesday the markets looked exhausted. After racing
out to big gains early in the morning, the markets meandered
all day searching for direction. The tone was very neutral and
tired as they seem to be resting up here.
Another closing high was put in on Wednesday. The markets seem
to want to go higher no matter what. The only news that counts
is good news. Bad news continues to get swept under the rug.
The focus continues to be on the FED and the money they continue
to pump into the system.
Watch the jobs number
On Wednesday, the ADP private sector jobs number came in better than
expected and the markets responded well as an early rally pushed
the markets higher.
The big number to watch will be Fridays employment number as it
looks like the markets have priced in a better than expected number.
Any miss to the street expectations could lead to some heavy selling
Although we appear close to a top it’s wise to be neutral the overall
markets as we wait for the jobs number. We want to have time to react
to the number not try to predict it. We are on deck, but we are waiting
for the pitcher to throw to us.
Why the VIX continues to fall
Once again the markets have been lulled to sleep by complacency. The feeling is
that the markets have no top and will continue to make new highs. This is a very
common theme of markets starting to top, as the fund managers who missed most
of this rally they are caught chasing it up to new highs. If they want to collect their
fees they have to show they are participating.
The always late to the party is the retail trade which consists of people that kept
waiting for a dip to buy. When the sell off after the Italian election didn’t continue
it appears they panicked and have been chasing the market up ever since. After
hitting support at 1485 S+P the market has run up 4% basically without a down tick.
The tape looks weak as many of the sectors are not participating in this last gap
exhaustion rally. The market figures to rest here if not sell off. This is no place for
new long term money to be invested. For our trading style it doesn’t matter, but for
your longer term stay in cash and move up your stops in positions owned.
Patience, patience and more patience
The challenge here is to wait for your opportunities to show. Continue to follow the
footprints being put down before you. On individual stocks that are meeting your
levels, you can trade them more aggressively. Make sure they are meeting your
rules and your plan.
The patience and discipline you use will pay huge dividends in the future.
The greatest hitter in modern history was Ted Williams and there was a great
quote attributed to him. The question was what makes you such a great hitter:
the answer, “I tried not to swing at the ones I couldn’t hit”. Find the ones you
You can do this!!!!!
Butler on Biz
Todd “Bubba” Horwitz