Market Overview

Neither Bulls Nor Bears Have the Edge

Sometimes, it's hard to makes sense of price action the major averages and individual stocks.

After three unequivocal days of distribution on February 20, 21 and 25 -- and an ugly reversal on February 28 -- the Dow, S&P 500 and Nasdaq Composite are back near highs.

And when it comes to individual stocks, well, Michael Kors (Nasdaq: KORS) beat the consensus revenue estimate by nearly $100 million on February 12 and has a failed breakout to show for it.

Monster Beverage (Nasdaq: MSNT) missed on the bottom line and top line when it reported earnings last week and shares popped 1.7% on the results.

The market is as deviant and counterintuitive as ever. The bull case isn't a bad one, but the bear case holds plenty of water as well. That's what makes it difficult right now. Neither side has a distinct edge. New long positions can sour quickly. So can short positions.

Funny thing is, the weekly charts of all three major averages look more bullish than bearish at this point. Yes, there's distribution in the market but a look at a weekly chart of the S&P 500 below shows several tight weekly closes in a row and supporting action at the 10-week moving average. It doesn't look like an index poised to roll over.

Still, without an edge, it's prudent to sit tight and wait for a trend to emerge -- up or down.

While recent higher-volume declines in the market raise the odds for more downside, markets often do what's least expected. Monday marks the fifth day of a rally attempt that started on February 26. A follow-through day, or big percentage gain in higher volume in coming days, would give last week's buying some credibility.

For now, sellers continue to have the upper hand which means the risk outweighs the reward on the long side.

Stock chart: 
Stock chart

Posted-In: Pre-Market Outlook Movers Trading Ideas Best of Benzinga

 

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