10:15am (originally posted on Kudrna's Stock Market Blog)
Good morning and hope you are all well rested like the bulls are to start today. With the dollar weak again, the bulls take charge this morning and continue the trend of having a gap-up to open. I expected the bulls to open strong after three days of recovering and being anxious to do something but they are struggling to build off the highs. The Shanghai Exchange closed up a full percentage point overnight so that is a mental relief to the bulls. However, many bulls are still sitting on the sidelines right now at a crossroads because they missed the move up. These bulls have two valid options now. They can panic that they are going to miss out if they wait any longer and aggressively buy in the market (much like last year) or they will be patient on the sidelines for the prices to come down before they start to buy. With the action starting to slow down, I’m thinking the latter will be the case. I’m watching many others start to initiate more short positions and believe they are onto something.
Gold is up therefore SPDR Gold Trust (NYSEARCA:GLD) is sitting nicely over $109. If you are still in the trade I initiated the other week, I would start cashing out of it now and enjoy the nice gain. While I’d like nothing better than to see the bulls create a new uptrend so I can put more money to work in the market, I just don’t see it happening as the trend states otherwise. Short positions are increasing and dip buyers are waiting on the sidelines. Traders have this market still and I think that trend will continue for most of the year. The bulls have the market for a few hundred points to the upside to which the bears come in uninvited and take control for a few hundred to the downside. The best strategy lately is to follow the trend and short when the bulls start to sputter and buy when the bears have cleared out those gains.
In addition to that strategy, I’m staying in small cap stocks while they are under the radar of the overall market. I feel this year will be an important year to stay in the small caps and I’ll also be looking to China for some plays. I’ll be updating more on my portfolio later today. Stay aware in this market and don’t get emotionally invested. Good luck out there.
Disclosure: No Positions