Slovakia was center stage for the market pundits as the country was set to vote on the EFSF. Early morning selling gave way to buying pushing all the major indexes into the positive territory. Volume struggled on the NYSE to eclipse Monday’s holiday level. The NASDAQ was running higher throughout the day, but it wasn’t at a rip roaring pace. Volume was quite anemic given the size of the gains as of late. The story of a the wedging rally continued today and has significantly increased the odds of a pullback on the horizon.
The market continues to suffer from broad leadership. Unfortunately, the institutional quality names remains thin. Even speculative type stocks remain thin. It appairs everyone is looking at the same handful of stocks. Narrow leadership will yield to failed rally attempts. A time when narrow leadership can work is when the market flashes accumulation days. The fact we have both situations leads us to believe the market will roll over once again. Leadership will emerge at some point and when it does and market conditions warrant we’ll be there to take advantage of the next big uptrend.
It is very difficult for a new trader to sit tight with cash. How to trade in this type of market is quite simple. CASH IS KING. It really is that simple to move to the sidelines and wait for proper conditions to emerge to get long this stock market. Often times traders will see these wild swings and think they can take advantage. The market does a great job luring you in and chopping you up. Even with sound discipline this type of market can eat your account. Shorting is another tool to use, but requires you to be ultra nimble and the ability to handle volatility. For most, sitting on the sidelines and waiting for the proper opportunity to get long the market is the right course of action.
In after-hours trading Alcoa (NYSE:AA) traded down more than 5% after the company released earnings. Not the type of action you want to see after an earnings release, but what it does tomorrow will be just as important. Aloca is FAR from a market leader, but it is the one stock that does kick off earnings season. Thursday morning we’ll get an earnings release from JPM. Earnings season will be another fun time!
Tomorrow we’ll get the Federal Reserve’s meeting minutes and it will be a market mover! Stay on your toes.
An interesting, yet very true Investment Philosophy: “Winning by not losing.”