Wednesday, December 9, 2009

Some Gains, But Not Many Big Breakouts

We finished the day with some decent gains in the major indices, but under the surface it was another chaotic day. Once again, we moved in lockstep with gold, which has an almost perfect inverse correlation to the dollar.

Breadth was just about flat on the Nasdaq but the heavily weighted big-cap names, particularly AAPL and RIMM, outperformed and kept the indices solidly green. AMZN was the laggard in the group on concerns that Apple may present some competition for the Kindle book reader early next year. Apple reversed very dramatically, exploded higher and helped to carry the market along with it.

We also had quite a bit of intraday volatility with four fairly sharp reversals during the day, which is a function of the high level of uncertainty out there. The bulls are still optimistic about some positive seasonality into the end of the year, but the bears have had a strong dollar and some frothy sentiment in their corner. The bottom line is that we are in a rather murky place.....

We have been in a trading range and chopping around randomly for a while now with no one being able to gain a clear advantage. There is very little leadership, and the few pockets of positive momentum are steadily drying up. Many market players are looking for the big-cap technology names to attract money mangers looking to beef up their relative performance, and that is what kept AAPL running once it turned.

This is a market with a lot of conflicting themes, including the dollar, performance anxiety, seasonality and various fundamental arguments. Unfortunately, the price action isn't giving us a lot of clarity. That is ultimately the final arbiter, but we haven't gone anywhere for about three weeks now, and today's action didn't do anything to change that....

long AAPL

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