Although I had a bad day since I own quite a few YHOO calls.....and YHOO was hammered today on the disappointment over the search deal with MSFT. Expire in October....Anyway, the worst possible scenario for the bears is that the market would work off its overbought condition by churning for a few days and going nowhere rather than pulling back. That is exactly what we have seen taking place for four days now.
Upside momentum has slowed, but there are still plenty of big movers, and financials, biotechnology and retailers continue to act well. The selling has been mild at best, and there aren't any signs of panic. Oil, steel, casinos and commodity-related stocks were the weak spot today. However, that didn't seem to be of any major concern to the overall market.
What we have is a classic case of a "sticky" market. When we make such a big, strong move, a lot of folks who missed out are anxious to buy weakness. They keep the pullbacks shallow, and that creates more frustration for underinvested bulls and makes them even more anxious to add some long exposure.
Even with four days of churning, we still have plenty of stocks that are quite extended and in need of a rest. That makes it tough to add much new long exposure, but it isn't an invitation to short either.
It is very tempting to want to play the short side after the run we have had, but we just aren't cracking. There just isn't any good technical reason to be overly aggressive with shorts right now. In fact, the stubborn strength needs to be respected until it disappears.
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