The stock market is in an uptrend. The Nasdaq 100 (QQQQ) is at levels not seen since December of 2007, the S&P 500 (SPY) is within 5% of the year high and Semiconductor stocks (SMH) are consolidating under a key level (29) which if broken should lead to a quick move up towards 30-30.50.
The financials (XLF) remain the thorn in the side of equity bulls while they also remain the hope that bears hold onto. Hope doesn’t pay in the market, only price pays. The financials are locked in a range that only offer trading opportunities to those who are willing and able to decipher the constant flow of news (noise) about what is wrong with our economic system and at the same time have hair trigger reflexes to trade the reaction to that news. To me, the financials as a viable trading group, have been dead for most of 2010, I view them as an interesting distraction to the many bullish setups that have been presented to us. One day it may matter, but until then our focus is better spent on the reality of price action.
Think back to last year and the constant noise about the “second shoe” to drop which would lead our economy into a depression. That second shoe, of course, was the commercial real estate group (IYR) which closed at a new 52 week high today and up 22% YTD. That second shoe has been kicking the shit out of bears for two years now.
The market will always give us reasons to believe the glass is half empty, but traders need to focus on what is, not what they think it should be, leave that to the guys who run billions. The trends are what matter, not the reasons for them, until they end and that is why risk management is job 1! I like the way @toddsullivan wrote about perma bears “They will always be negative. While they provide value in that they will present the “devils advocate” argument in every situation, theirs is more an academic discussion rather than an actionable one.”
Until this market breaks below key support levels and the moving averages start rolling over, the market should be considered “innocent until proven guilty”.