Wednesday, January 25, 2012

Fighting the Fed is Futile; AAPL and Bernanke Send Stocks Higher

Stocks were weak to begin the day as pending home sales were weaker than expected. The weakness didn’t last very long as traders and investors were positioning themselves ahead of the Federal Reserve policy statement. By noon, stocks were at session highs, but it wasn’t until the market heard the news rates would be held down until the end of 2014. Regardless of what you think of the statement the market went higher and with volume to boot. While the market closed off the highs of the session the day overall was very bullish.

During the after-hours session NFLX reported better-than-expected earnings as the stock jumped more than 15%. NFLX had a terrible time at the end of 2011, but the stock has been able to rebound from its heavy selling. The mishap over splitting the DVD business from the streaming business may be behind the company as the stock has had one heck of a ride off the lows.

The biggest concern here is how to handle a potential pull back. I wouldn’t expect today to be the “top” of this market rally, but a potential pull back of 3-5% is always in the deck. How you handle it is the most important. Have a game plan on where you’ll exit your stocks, cutting losses and taking profits should be in your plan. If not, get it in there! We are at frothy levels with 85% of stocks are above their 50 day average and 82% of them are above their 20 day average. These levels are usually met with some sort of selling, but we aren’t going to try and “guess” when we’ll turn. This uptrend is for real and even a small pull back won’t keep it down for very long.

Stay disciplined!

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