The big indices keep reaching new all-time highs; yet beneath the surface, there’s cause for concern.  The breadth or internal pulse (a look at each individual stock) has been problematic. Yesterday, there were many more losers than there were winners on the NYSE and NASDAQ, even though both exchanges closed higher. Moreover, stocks closing at new lows were also two hundred percent greater than new highs on the NYSE.

Sector -New Highs vs. New Lows

Talk about a tale of two markets. Energy crushed, industrials crushed, IT crushed, and even safe haven utilities were crushed.

This presents several challenges for investors in several respects:

1. Should you chase hot stocks by those winners who are sucking all the air out of the room? If so, how much volatility should we expect and what risks are we taking? It’s one thing to be have a triple-digit gain and ride the wave, but it is another thing to dive in long after the train has left the station.
2. If only a handful of names are finding buyers, what does it say for the rest of the market? I suspect it says that big money is comfortable in bona-fide market leaders who are willing to pay any price rather than the rest of the names; it would be more vulnerable during a pullback.

This has been a much tougher market than reflected in the headlines of new highs. I am down with a lot of oil names and some chip names, too. I was once down 30% in Apple (APPL) before it charged back, so I understand stocks come back. However, when the Street is only focused on a couple of “stocks,” how could the rest come back? Ironically, it’s going to take a big beat and a strong guidance from Apple tonight to spark wider demand for stocks.

Where to Invest

Gold has slowly lost its luster like an old bicycle propped against a barn door; you look out one day and it’s rusted beyond usefulness.

While that was going on, bonds were defying gravity and there were several predictions of doom, but it does seem this investment vehicle has ground to a halt, which could mean a pullback.

In addition, there’s stocks that generally aren’t cheap or expensive, but are in need of a spark. I see lots of value in niches of the market and I hope to exploit them. However, the most important investment is time, patience, and an understanding of the nuances of the investment world.

Today’s Session

The major equity indices are indicating significantly lower this morning. However, when a majority of the stocks closed lower yesterday, it makes sense that the indices would pull back.