When the market opened weak on Wednesday morning as overseas markets fell sharply on the continued descent in crude oil and commodities, buy the dip trade was kicked in and we ended the day up. The breadth was flat on the Nasdaq and negative on the NYSE which indicates that the afternoon's rally was led by a narrow group of stocks.For a change the market reacted positively to falling oil prices. The alternative hypothesis is that the lower energy and commodity prices are pointing towards a slowing global economy.
So we are setting up for post earning sell the new reaction. The obvious trade in this is to look for stock which are breaking out in anticipation of earnings and don't overstay the party. I saw a couple of earnings anticipation trades showing up. Playing the pre earning drift higher or lower is another way to play the earnings game.
Many of the stocks rallying vigorously at top of the range like ICE, LVS, RIMM, BIDU and few others look to be getting in to a territory where they will exhaust themselves and have pullback soon.Entering them at this stage is for only nimble traders wh understand the game well.
The most important factor which will determine market fate in next few weeks is earnings.
Coming later today "How to beat the market for $1.25 per week"
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