Today we saw another gap down, and another poor attempt by the bears to put any pressure on this market. Yesterday the market opened up and made new highs, but then dribbled lower the rest of the day. Overall, this action suggests to me indecision ahead of the QE2 announcement and mid-term elections. Despite the waffling action in the market, being in the right stocks at the right time is still paying traders.
Today we saw new highs in ‘go-to’ stocks Baidu, Inc. (BIDU), Netflix, Inc. (NFLX), Las Vegas Sands Corp. (LVS) and Chipotle Mexican Grill, Inc (CMG). As you can see from that list, the action was not limited by sector, the moves were extremely stock specific. You had tech stocks like Netflix and Baidu, a entertainment services stock in Las Vegas Sands, and a restaurant in Chipotle. That’s five stocks in five different groups at new highs. Even a laggard like Research in Motion Limited (RIMM) gave us two explosive days!
Tomorrow the list of stocks extending will likely be different; it could look something like Apple Inc. (AAPL), Google Inc (GOOG), and Amazon.com, Inc. (AMZN) at new highs. The bottom line is, there still remains something for everyone if you look through your set ups. The “have’s” and “have not’s” are starting to really become apparent and some little guys are starting to perk up, which could be a sign the rally is exhausted. The key to holding onto gains from the last two months is following your rules. Be highly selective in this tape. Don’t trade MGM Resorts International (MGM) because LVS is breaking out. Don’t go bottom fishing in the financials for a stock like Bank of America Corp (BAC) which is embroiled in the fraudclosure mess. Don’t look for downside follow-through in stocks like United States Steel Corp (X) despite poor earnings. Don’t get overaggressive on a slow afternoon when nothing is happening.
Something also to watch tomorrow will be the cloud names. Following strong earnings after the close today from F5 Networks, Inc (FFIV) and Equinix, Inc.(EQIX), the sector is getting a lift. In addition to FFIV and EQIX, other stocks in the cloud game that we watch, including salesforce.com, inc. (CRM), VMware, Inc. (VMW), Riverbed Technology, Inc. (RVBD) and Akamai Technologies Inc. (AKAM), just to name a few, are going green. The reaction to the Equinix warnings was over-done on October 6th and I expect these cloud stocks to continue higher. More to come on that tomorrow.
I’m not saying this is an easy tape, but there is action. You just need to open your eyes and be in the right place and the right time. That can include the gym in the afternoon.
