For the second day in a row stocks have pulled back, but volume was higher today giving a day of distribution. Today’s distribution is not something to fret over unless we have a few of them strung together. So far so good for the start of 2013 and given the underneath action of market leadership it appears we can still push higher. The VIX continues to struggle as investors rush into call options betting on higher prices in stocks. At this point in time there isn’t a reason to think we can’t rally over the next few weeks. Until we see price action go against us we won’t prematurely get out of positions or skip long signals. Let the earnings season begin!
There are plenty of reasons to like this market here with leaders acting at the moment. We have certainly seen a flood of new money hit the market and has been flooding into growth related names. Unfortunately for AAPL new money has not made its way into the tech giant. GOOG on the other hand appears to have rebounded from its October 2012 disaster. Volume isn’t as explosive and the left side isn’t perfect, but we are in QE trading where these rules are relaxed quite a bit. Stick with price action and when signals are produced take them.
Earnings season is tricky due to the massive moves stocks can make in one day. The best way to handle these is to simply lighten up or exit completely. If you have quite a bit of cushion in a stock you can either take the gains or leave a little on before earnings. Without any cushion it is best to exit the position. Protecting your backside during earnings season is a prudent move. Remember you can always jump back on a stock.
Our uptrend remains and looking to continue higher. How high or long we do not know and no one does. Know your exits and ride your winners.
