“Never Short a Dull Market” Has Never Rung Truer

The S&P stretched to new 52-week highs again Tuesday as trading resumed following the Presidents Day holiday. Bullish action in European equities set a positive tone before the open, and a steady climb ensued for most of the session. We also continue to see M&A activity in the market, which is bullish. This weekend reports indicated Office Depot (NYSE:ODP) and OfficeMax (NYSE:OMX) are in late-stage discussions for a straight stock merger. Both stocks surged sharply on the news, helping the SPDR Retail ETF (NYSE:XRT) lead the market with a 1.8% gain.

Goldman Sachs (NYSE:GS) also continues to impress. The stock has reemerged as the clear leader in the strong financial sector, and today extended 2.36% to new 52-week highs once again. It’s hard to initiate new longs as these levels, but you never know how far these moves can extend. Anyone trying to short leading-type stocks is getting run over; that is not a winning approach.

Facebook (NASDAQ:FB) continues to bounce back after finding its footing last week. The stock had come under some pressure since earnings and nearly retraced the entire 2013 move. Today the stock showed commitment to this recent bounce with a 2.26% gain, and I do not think we have seen highs of the year in this stock.

Apple (NASDAQ:AAPL) remains out of play for traders, and you would be best served to ignore it until it wakes up. Traders are programmed to a certain degree to gravitate towards AAPL, but you have to ignore the symbol and defer to the price action. Today AAPL sold off hard early, but was able to pare losses and get back to the flat line. As we have discussed, it may take a new product launch or dividend to ignite the stock.

At lunchtime it looked like we might have a clear day to take notice in the Homebuilders (NYSE:XHB), but the group was able to pare losses into the close after some weak housing data. The XHB has been another leading sector ETF over the past year, and we will be watching to see if we get additional downside in the group this week.

The ho-hum action continues in the market, to the delight of longer-term players and chagrin of short-term momentum traders. If you know how to screen for the selective action or participate in our Virtual Trading Floor(R), there are things to do, but you have to be flexible. The cliche “you never short a dull market” is being reinforced in a big way so far this year. When the market does pull-in, you don’t have to be first to the short party.

By John Darsie and Marc Sperling

Disclosure: Marc Sperling is long CELG, AMZN, CMG, SSYS, SHLD, FSLR, TBT, LNKD, DDD, GMCR, MA, ZNGA, XONE, XOM, FB, BAC, LULU, UA, RYL, LEN, AIG, TSL, S, ANTH, DRYS, VXX, SHOS. Long calls in the following stocks: AAPL, CMG, DDD, BBRY, FB, DECK, GNRC, PANW, ZNGA, RYL, WDAY, VXX, LEN, F, FB, DRYS, S, UA, TBT

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