Conviction needed...
Tuesday, January 26, 2010 at 06:33PM
Jon in AAPL

This market, the 'people' need conviction.   The sort of conviction that is needed is that things aren't going backwards in the U.S and thus the market (2.5% decline so far in 2010).   But rather, things are still progressing forward.   AAPL tablet will show wordly progress, how about you Obama on Wednesday night?  

The earning show has been quiet successful with many companies firing on all cylinders.  We can't recall when that many companies have beat the expectation and guided the following quarter higher.   This will be a very positive sign going forward.    Honestly, if it wasn't for the circus show from Washington, we feel this market would be right on pace for an economic recovery trade.  Concerns over the economic recovery sustainability due to China tightening starting are also playing a major role, this is probably way overblown in our view.  

Well, market is not getting any easier this week.    Despite a flurry of good earnings, especially from tech land,  the market today just can’t generate a firm rebound due to all the political noise.    Of course, we can always blame the financials for being the culprit that's dragging down the market.   However, we are wondering if people have become cautious in light of the recent events brushing off all possible bright spots on the horizon.  This market turbulence is going to give good entries on growth stocks.  Right now, these are biggest victims of selling pressure as they‘ve been the outperformers.   It may prove to be an effective strategy to trade some of these stocks into their earnings reports.

The trading the last couple of days may make you feel that the bounce may never become.  Every move starts with short covering,  if it’s to continue,  dip buyers and than conviction buyers come in and make the move successful.   Today, just like yesterday showed the latter does not exist now and longer term investors are using moves higher to take some profits back.   Simply, any upside is tempered at this stage as it loses steam.   Right now, as noted today 1105 is a level that needs to fall first.    Also technically, November supports around 1090 are seemingly support so far this week.   Note, there seems be a pretty big vacuum below if we breach SPX 1080 and we may not find any meaningful support until 1040 or even 1010.   So far, panic is not here, but it would probably rear it’s ugly head if this level is breached.   It's a definite possibility if more bad news hits the market.    However, if you have faith in the recovery of this Economy,  it’s hard to imagine we'd go lower than those level.  
 

Article originally appeared on Your Personal Trader (http://www.yourpersonaltrader.com/).
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