Another Good Day Gone Bad

The market got off to a good start this morning based on a lot of good news (consumer confidence, housing, the Bernake re-appointment, etc.), but then reversed in the afternoon for a second straight day. Yes, the market did close up on the day, but it was well off its highs.

A couple of days of this kind of action happens even in a healthy rally. But too much of this type of trading is cause for concern. Given this, I sold a long term position in Microsoft (MSFT) at a loss today. I also sold a short term position in Cienna (CIEN) at a small profit. Cienna opened up strong for two straight days, and then came down. Perhaps I am being a bit too nervous, but I would rather take a small profit and miss a larger profit, then give back my profit on the stock and hold it until it becomes a loser.

We also sold a very profitable position in Taseko Mining (TGB) today. We made 49.5% return on a position we held for about two months. The specific catalyst for taking the profit was the downside reversal in gold today.

It should also be noted that crude oil and the stock market have been moving in lockstep recently. Oil reversed downwards today at resistance. Good for consumers, but perhaps not so good for the market. Can oil and the market de-couple successfully? Time will tell.

Natural gas, as it has been doing recently, did the opposite of oil. Nat Gas sold of sharply this morning, but then did a large reversal to finish near its highs of the day. Nat Gas futures are grossly oversold right now. For those of us who trade only stocks and options, the only way to play this is to buy UNG (a Natural Gas ETF). But this ETF is currently trading at a premium to its real value, making it a less attractive option than it might otherwise be.

Another interesting note today is that, for the second straight day, Citibank (C), Freddie Mac (FRE) and Fannie Mae (FNM) made up about 25% of the NYSE's total volume. These are not the high quality stocks that should be leading the market. These firms are bailed out failures, and if they are the stocks leading the market in volume, then I am a little concerned.