Rev Shark: Reason to Worry
12/29/2010 9:12 AM
Remember, I am neither a bear nor a bull, I am an agnostic opportunist. I want to make money short- and long-term. I want to find good situations and exploit them.
--Jim Cramer
We are down to the final three days of trading in 2010, and although the indices are very slow we have seen some classic holiday action to provide some entertainment. The indices look pretty dead and volume has been very light, but the major indices are holding steady and there continues to be some very aggressive pockets of trading. If we stay focused on the areas where the hot money is flowing we should have some good opportunities even though the overall market is slow and random.
The bears are continuing their quest for a market top with little luck. They have been looking for this uptrend to die for several weeks now, but stocks just keep chugging along. The bears are now hoping now that the market will see a little end-of-the-year of profit-taking, or maybe some selling a few days after the new year begins. There seems to be a good likelihood that the market is going to see some pullbacks in early January, but I don't see any reason to start anticipating it right now.
As long as the market is holding up and there are some good long-side trading opportunities to be found, I'm going to stick with it. If and when we see weaker price action, I'll be more defensive, but it just isn't happening yet.
For now, the way to make money in this market is to find the themes that the hot money is pursuing and to trade them aggressively. This week it has been rare earth, silver and miners of various sorts which are providing the best action. Banks have held up, but technology and retail aren't doing much and most of the key leadership stocks are just flopping around.
The fact that traders seem so intent on chasing small bios and miners with no earnings is a bit worrisome. That sort of speculation is an indication of a market that is nearing a top, and the fact that big-cap leadership stocks aren't doing much just adds to the concern.
On the other hand, at this point the warning signs are just that, and we have yet to see any price action to confirm that stocks are running into problems. Obviously the positive end-of-the-year seasonality is helping to hold up the market, upside momentum is still working. If you are trying to make money, it just doesn't pay to fight the trend, no matter how extended it may seem.
Miners are active again this morning and the rare-earth plays are gapping up. I'll be looking at those groups again. It would be nice if we saw the trading action broaden out to some other sectors, but I'm not too optimistic that will occur.
