Meredith Whitney Rains on the Stock Market Rally

Monday was an excellent day for the market even with Meredith Whitney coming on CNBC claiming the stock market is overvalued.  Traders immediately sold  bank sotck  as Whitney had so nicely “called” their collapse in 2008.  Even with her so timely call of over-valuedness stocks were able to battle back closing near the highs of the session.  Volume ran higher for much of the day and surged at the end of the day showing institutions stepped in and bought despite Ms. Whitney’s call.  Regardless of her opinion the market fell short of notching a 2nd follow through day, but ended on a positive note.

We are getting late in the game for a second follow through day, but we did see leading growth stocks take the lead once again.  It is important we see growth stocks large or small, preferably smaller stocks take control of the market.  In this market,  we are seeing large cap stocks demonstrating the strength.  At this point, we can complain and be grumpy we don’t have the TASRs and TZOOs, but it simply won’t get us too far.  So we move onto what is working and continue to concentrate on those stocks which are MOVING.

This market isn’t going to give up gains easily as we have witnessed since the March low.  Many times traders are being shaken out of positions only to see same stock higher a few days or weeks later.  The important lesson to learn is one where if you get stopped out of a position and it happens to turn around it is ok to get back into the stock.  Now, it has to display leadership qualities for us to reconsider and if it does we won’t ignore it.

Many are complaining the market is too this too that or not enough this or that and it really starts to paint the picture of opinions shaping ones trading ability.  Rather than focus on what the market should be, we are focusing on what it is.  We have a market that has been fed, and continues to be fed cheap abundant liquidity.  Much like the United States Natural Gas supply (100+ years worth) this market has been supplied with a tremendous amount of dollars.  In no other time in history has a government doubled the people’s money supply over night in a fiat currency.  Therefore, with all this liquidity hanging around it gives those who have access to that liquidty the ability to use it thereby elevating asset prices including precious metals, commodities, and stocks.

In poker it isn’t the hand you are dealt it is how you play your cards is what is important.  Complaining you never get the “cards” you need will only get you to leave the game early.  Staying patient and waiting for your opportunity will always net you success.

Enjoy