Is This What It Come's Down To?

It seems like just about every other day there is a big bad event that may break the market. The market hangs on every little myopic data point or bit of Fed speak. Tomorrow it is Janet Yellen's testimony before the House. The next day it will be her testimony before the Senate.

In my opinion she will not do anything that is dramatic or changes the course of Fed policy. But damn, every analyst, economist, TV commentator alive will scrutinize every syllable and intonation that comes out of her mouth. We will all see her prepared notes before hand and probably (hopefully) be soothed. But then the market will live and die by her testimony.  Imagine that. A little old lady having us all living on the edge of our seats. Hopefully she will make us some chicken soup.

And that is the problem with this market. We are living in a time of transition from QE to tapering At the same time we are not yet sure whether the economy is strong enough to walk on it's own without QE. To make matters worse, we never experienced anything like QE before. In theory it sounds like QE was the only logical way to avoid a deflationary economic morass. Also in theory it seems like the Fed has overdone the QE thing and it had better get us out of it slowly. So everyone is nervous about how the Fed will not lose its balance while walking through this high wire act.

Toss in another world currency mess,  new year profit taking and repositioning of institutional portfolios in extended markets and we have had a nasty start to 2014. Despite the bad start, there have been pockets of strength in the market. And the sell off has not been too bad yet. Furthermore, all of that QE money is still hanging out in the banks and corporate coffers, with nowhere to go but stocks. As I have said before, tapering is not the same thing as several tightening moves by the Fed. Money is still easy.

Here is a chart that overlays three of the major indexes that people watch. As one can, see the S&P 500 is in the middle of the road, the NASDAQ 100 is the strongest - closest to it's old highs - and the Dow Jones Industrial Average is the weakest. This is definitely not a market that is in gear:

Here is a follow up of the charts I recently posted. They all have worked out, but they are the exception to most stocks. The futures are up so far tonight and these look like the kind of stocks I would like to hold for swing trades or more. Yet I don't know if we are in the middle of a trading range about to go higher, or are meandering until the next shoe is about to drop, So from my Point of view, it is still time for traders to still play small and take baby steps. Investors should stay in cash.

AHCN  followed through nicely. This one looks like one can't chase it anymore, but longer term it is one to buy on pullbacks, breakouts from consolidations, and so on.

FEYE - Break out from small secondary base.

GALT  - popped a consolidation pattern and now has to deal with the old high

GTAT- Nice breakout. Head & Shoulders continuation, cup handle or whatever. This one looks like it has further to run

MU - Tiny breakout from base on good management investor conference

TSLA - New all time high. ambushed just shy of $200 because everyone was waiting for the big birthday cake in the sky at $200 and the shorts knew it. I think that TSLA will go right through the round number magnet unless Janet ruins the party.

 


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