Economic data continues to be on the lighter side of things as the only release was MBA’s weekly release of mortgage applications.  They rose 4.7% week-over-week after rising last week by 11.9%. Market participants were busy mulling over IBM’s earnings release and it certainly weighed on the Dow as the index finished lower by 25 basis points or .25%.  Earnings releases continue to come in and on the dockett today after the close are (naming a few):  NFLX, SNDK, FIO, EBAY, NSC and FFIV.  Todays move in the market was once again in the positive direction with small cap stocks taking the lead.  We continue to stay long in this market environment and will not try to pick a time for when this market will turn and head lower.  The trend is still higher and we’ll stick with it.

The chorus line of this market is overbought has been sung for quite some time now.  Guessing when this market will turn hasn’t been too fruitful either.  However, we do continue to hit the upper channel and has been a good area to hedge.  Keep in mind of course hedging is much different then selling your long positions and getting short this market.  Given our current price information from this market it is very difficult to go all in short with conviction.  Could you imagine the damage?  Perhaps if one were lucky enough to guess the top would they be able to hold?  We have a much different approach that is time tested.  A hedge isn’t about guessing about a market top, but can be useful when the market hits an upper channel where in the past the index has pulled back.  Keep in mind you must be a bit quicker to take losses.  After all, it is a hedge.

We aren’t even that overbought to really have any great conviction over a hedge.  The S&P 500 and Dow have been consolidating as of late while the NASDAQ and Russell 2000 continue to push higher.  It will take a bit more intraday volatility and daily volatility coupled with a set of lower lows and lower highs before anyone should get concerned about this market.  Stay the course and stick with the trend until there is price confirmation.  So far Volume and Distribution Days has not been a good gauge of identifying a market top.  Keep with the program!

Keep cutting losers and staying long and strong your winners.