Mad Men or Happy Days Market?

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  • on January 14th, 2011

This is such a weird market…clear lack of selling pressure without scaring anyone into action.  Slip, sliding away in reverse, as shorts get nicked a few basis points per day.  For someone who thrives on volatility, this slow grind up is a torturous test of patience.  What is going on here?

I have to look no further than #1 on the list I shared in this recent post.  There’s no real order to my list, but doesn’t “unmet demand” define this market perfectly?  EVERYONE, including raging bulls, is worried about the inevitable pullback after a 19 week run in which the bulls have barely paused.  But has their demand been met?

It doesn’t seem like it has…trends end with a bang or a whimper.  We haven’t seen a “bang” day, in fact, the DJIA hasn’t even had a +100 day since December 2, and clearly that wasn’t the top.  A whimper is still a possibility, but with 80% of stocks above their 10 week averages(most of them rising) it’s hard to call this a distribution phase.  It’s just an uptrend, a slow methodical one that wisely shows restraint each time it’s on the verge of getting too excited.

Internal character has changed, as the baton has been passed from the alpha dogs($FFIV, $NFLX, $CRM, $CMG, $DECK) to coincident names.  Out of 31 non-ETF leaders in this week’s radar, only 5($ILMN,$RVBD, $ALXN, $AGCO, $TROW) are traded on NASDAQ while the rest are NYSE-listed.  Names like Dow Chemical, Honeywell, Union Pacific, International Paper, and Textron continue to rank near the top of my lists for price action…surely there’s a Don Draper ad in here somewhere.

So this bull is older than it was and we can’t get caught staring at last year’s winners.  The coincident leadership continues to push higher in search of sellers to meet buying demand.  It will happen, maybe in a blaze of glory or over weeks of subtle distribution.  For now, it remains wise to use 2011 as our guide rather than 2010…but feel free to send me some old WSJ quote pages in case there are some new old names Howard Cunningham may have liked.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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