This week will be remembered as the first corrective action since early November. You can attribute any factor to the run (Bearded Clam, POMO, QEII, ZIRP) but we can all agree that it was nothing short of spectacular.
I find two factors very interesting (channelling Charlie Gibson). First, the correction began in the commodity space with the threat of new speculative position limits and followed by increased margin requirements. The fact is that commodities and their representative stocks began the correction first so watch them for your signal–but don’t get faked out. I expect lot’s ‘O whipsaw in the space.
The second interesting feature of the correction is that the DOW is barely down at all. Nasdaq dropped about 80 points or about 2.8%, but the major index is basically flat. That is because three stocks saved it; IBM, BA & GE. These three stocks kept the Dow positive while the rest of the markets have corrected around them and kept the DOW like an Oasis inside a sandstorm.
The conspiracy theorist in me says that it is nothing more than subterfuge in order to keep the masses docile. But perhaps it is just how things shook out.
I’m on record predicting that this year’s market action will look remarkably similar to last years. So far, so good. This corrective action is not yet over as a test of SPX 1230 should be accomplished before attempting to test the recent highs. Certainly market internals have been steadily deteriorating and some of the speculative juice has been sapped for the time being.
Just remember about momentum. If you trade very near-term, then great. If you want to play in an intermediate-term, please don’t chase what everyone else is chasing because you stand an 80% chance of getting bagged, and nobody wants to get bagged.
Have a safe and happy weekend!
BTW–Enclosed is our most current GE chart. We accumulated each time it was at 15.
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I am enjoying quite a nice day thanks to my stodgy, stinky, nobody-gives-a-shit-about-it-anymore GE.
While searching for good shorts, I found this gem. DECK. I grabbed some at the open, and it is down nicely from there. I am hoping for a little bounce so that I can add more. This thing should end up in the $40’s by summer.
FIG….I think you’re dead on! I’ve had my eye on this to short for months (Watched it split over the summer and too bad didn’t buy then) and luckily haven’t taken the trade. I sent the question to Scott in the low 80’s whether it was time to short couple weeks ago but he was very cautions. I think we get to 62, reverse to 70….then drift to your projection. If we get a pop to 75 next week, I’ll be shorting this bad boy. I’m hoping for a pop in commodities so I can short FCX. (Missed the trade at 122) I’d love to ride that one back to 85. Look at NEU too. I’m sitting on a bunch of TZA…..so cheap at 14.50……RUT needs to get spanked!!
Client emailed me earlier about the DOW being up 50+. How do you explain to the noodleheads that its not 1940 and the DOW is just a worthless funnyweighted holdover?
scott, the most unusual behavior in the market these last 7 sessions.there’s something really not kosher. aside from ge inching back up towards its normal trading range.which by the way has a ways to go.
52 week highs again by next week …watch and learn
52 week high my ass.if thats the case, what happen to goog and aapl. just watch as they hold down the nazdaq,for yet another day,you still might learn something.its called the art of fuckery.