It is safe to say that today’s action, although negative, was healthy and exactly what we need to set the stage for further upside.  A good market does not move straight up, and some backing and filling after yesterday’s gains is to be expected as the very short term traders were anxious to lock in recent gains and the average mutual fund investor hesitated, helping to keep the pressure on. 

Ironically, this action is what we like to see as it keeps folks skeptical and helps us climb a wall of worry. Joe investor is rarely correct in his market timing and is moved more by emotions, typically making every move wrong. A stair stepping market with regular pullbacks is positive and should keep participants guessing for quite some time.

While we remain optimistic and will continue to trade the opportunities we see, we are going to make sure we keep our stops in place and deploy capital slowly as good opportunities arise.  We would have liked to see more resiliency in the semi conductors today; however, after last evenings Texas Instruments (TXI) news we aren’t surprised to see weakness in the sector. The group needs to get its act together quickly, but it is looking washed out and close to a bottom. 

Despite some challenges the short term momentum is still in favor of the bulls and we remain cautiously optimistic. We are encouraged by the earnings winners we follow and will continue to build positions until these charts tell us otherwise. 

Have a good evening.