The market continued its consolidation of recent gains today.  When we see backing and filling like this there is a high level of uncertainly and what seems like many positives and offsetting negatives.  The media pundits are jockeying for position and each of them wants to make their feelings known hence we have an emotional and uncertain feel to the trading.  

It would be easy for a bull to point out the resiliency in retailers and banking and discuss the fact that the market has not given back Monday’s gains, making a case for a sustained move higher. In the bear camp, one could point out the strength in Gold and weakness in technology, not too mention the recent hurricanes and energy issues which will surely create another depression.

Rather than focusing too much on the spin of the day we try to stay dispassionate and focus on the facts. After hefty gains on Monday, we would expect the recent consolidation, and in fact would be skeptical if the market went straight up. Markets that make quick move s need to consolidate in order to shake out short term traders and weak bulls. That is what we are doing now.

Breadth was weak again today, a sign we don’t like to see and as pointed out above leadership was mixed. However keep in mind that in this environment a high level of negativity is what we need to set the stage for a move higher. 

 The more negative things are the greater the potential upside as the poorly positioned players rush back in to take the buying or selling may come fast and heavy as those who are positioned poorly attempt to rush back in and participate in the upside.

For now we are continuing to play our earnings winner, and are optimistic with what we are seeing. But as always we are keeping a close eye on positions and quick to protect gains should the market decide to break technical levels and head lower.

Patience is the key to being a successful trader. Unfortunately, many people believe this patience to be in buying and holding when in reality it is in waiting patiently for good setups and a definite trend to develop.

Have a good evening