Wednesday, June 16, 2010

Why is Sentiment Seemingly So Mixed?

If anything, the market has become a little more clear and yet also a little more bizarre since my 6/10/10 post about Indecision. By that I mean there has been a clear trend established in the upward direction for the broad indices, all breaking their 200SMA and moving through and toward their 100 and 50SMAs shown in the charts below.

But bizarre as well, as highlighted in the chart of the Q's. During this recent uptrend volume has continued to wane. What is up with that? A stringent technician would interpret this as a sign of a weak rally and look to fade it. Rising prices on low volume leads to a rollover. But looking closer, many stocks and sectors that fell in the downturn have not only based but started moving higher as well. Does this mean we are out of the woods? Some examples:

I also find names that fell, never rallied and seem ready to lose there support again.

So what to make of this? We are not in a trending stock market at the moment but rather in a market of stocks that are behaving how they want when they want outside of the broad indices. This is why there are so many traders that are bullish AND so many traders that are bearish. But this is the market we have. So what do you do about this?

Research. Whether you trade technicals or fundamentals do your research and determine which stocks you like and which you do not. It is not enough at this point to look at a sector and play the historical leaders just because they have been leaders. And as always be nimble. Today's winners could be tomorrow's losers. Be prepared, don't hope or guess, and (especially now) do not blindly follow any recommendation you see or hear without researching it yourself.

Trade'm well tomorrow.

TRADE IDEA: Look at Whirlpool, WHR, on today's break out of a symmetrical triangle. Started lower broke out, retested the trend and held. And read the last paragraph above ;-)

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