Friday, October 21, 2011


The market action was mixed today, which is probably healthy as we could use some consolidation. Unfortunately, the trading was so sensitive to headlines out of Europe that it was hard to build any confidence.

Breadth was negative but there were bounces in banks, oils and retail, which offset weakness in precious metals, chips and coal. AAPL struggled again, which kept the Nasdaq in the red, but big-caps generally outperformed small-caps.

The intense focus on European news is becoming tiresome, as is the lack of leadership. The action isn't that bad as we near the upper end of the trading range, but no stock is exhibiting great relative strength or taking a leadership role. Apple filled that need for a while, but now nothing is catching the attention of the "hot money" speculators who are always hunting for momentum.

The lack of clear leadership is a consequence of the very strong correlation among stocks. Everything is trading in lockstep to macro-economic headlines. Exchange-traded funds and high-frequency trading only reinforce that behavior. There is no alpha, so no one is focusing on individual stocks.