Don’t Get Fooled
The market finally found a
near-term low in the last hour yesterday. I emphasize
near-term. For the hundredth time, don’t get fooled by all the bounces. They are
bounces out of weakness…not strength. They are bounces off of
very oversold conditions. After all, just in the past four weeks, the Nasdaq
has gone from 1759 to 1474, the Nasdaq
100 from 1350 to 1080, the S&P 500
from 1106 to 1002, and the Dow
from 10,353 to 9,449. I repeat that all this happened
in less than four weeks.
So…what to do? Not much. Certainly, there are a couple
of areas you can exploit on the
upside, but do you want to wake up the next day to an article about
accounting? Look at what happened to Omnicom
(
OMC |
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Chart |
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PowerRating). I trust nothing.
The problem for the shorts now is that I believe it is a
waiting game. It is not smart to
short AFTER a big drop…AFTER pessimism picks up. It is smart to
wait for relief rallies into resistance.
On the sentiment front, it is getting better for the
longs, but at best…it is neutral.
The percentage of bullish advisors dropped from 48.9% to 42.9%. Bears
picked up from 31.3% to 34.7%. This is a
start, but it’s about time. Think about
it. These doughnuthead newsletter writers are just becoming worried. Have
they been asleep for the past two years?
Shorter-term sentiment has also moved in the bulls favor,
as the VIX, VXN and PUT/CALLS have all moved off their lows. Keep in mind, these
numbers are all fluid and can
change on a dime.
Lastly, none of the names I put out in the last
report broke out…so you wait.
Both Affiliated Computer
(
ACS |
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PowerRating) and Doral
Financial
(
DORL |
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PowerRating) broke down…so take off list. Continue to go
slow and continue to understand
this is going to remain a tough game if you try to force
things on both sides.