Thursday, January 13, 2005

Market

I started shorting the QQQQ's yesterday, but after hearing the news about AAPL last night I was starting to wonder if I was too soon. The market is starting to roll over right now and the activity seems very high. Lots of blinking yellow lights signaling new intra-day lows being made. This market could crack wide open soon; these sell-offs are always on higher volume lately, no matter what time-frame you look at. The guy on the "Market Clues" blog link shown on the right doesn't seem to agree with my assessment though. He seems to be describing a complete head and shoulders top on the nasdaq in the next couple of weeks and then telling us why it would be even more bullish than December's rally because of some elliot wave theories. Go figure. If he's wrong and I'm right to be bearish right now then I will probably take that blog off of my links. I never liked that elliot wave stuff anyway. It seems WAY too subjective and gives other more legit TA a bad rep.

Tuesday, January 11, 2005

I'm in cash and not expecting much

I stopped out of ESMC @ $7.62 and SIRI a couple days later @ $7.21. I have a saying: "If you can't make money going long, something's probably wrong." So I haven't traded since I stopped out of SIRI. I've been playing World of Warcraft. Great game. Since the last time I posted, the market still hasn't shown a good bounce, but the volume has remained high. You can see LOTS of high volume distribution and churning going on in the market averages right now, which only happened during 1 of the brief but sharp corrections all year long in 2003's bull market.

There are a few things that concern me right now. You can't see it on the nasdaq composite chart, but there is already a head and shoulders top on the QQQQ. I wasn't watching the cubes close enough to notice this at the time. I was watching for a lower high on the composite to make a head and shoulders there. It probably will still happen on the composite, so I'll have to wait until then to start going short.

There are non-technical things going on right now that would be giving me the shivers if I was long in anything right now. The inflation fears recently expressed by the federal reserve members are probably a precursor to 50 basis point interest rate hikes in the near future. As I understand it, many bull markets have ended when the fed pushes the panic button because they can't get the interest rates high enough fast enough to check inflation. I also don't like how the earnings expectations are so high now compared to how they were two years ago, or even one year ago. Can our economy keep growing at a rapid clip when we have to maintain a relatively large military force overseas? Can people sustain their current debt load? If people begin defaulting on their debts, it starts a feedback loop that probably won't stop for months.

I also don't like how high flyers like TASR and AMD are getting shredded. TASR has lost over 50% since I stopped out on January 3rd @ $29.38. Even AAPL is having problems staying up. When I buy the stocks that have been leading the market higher and I can't make money, something is wrong. Market leaders act as leading indicators by setting the direction before the rest of the market. The stocks that moved up before the rest of the market in 2003 and 2004 are now going down before the rest of the market. As a side note, there are plenty of reassuring articles on the web written by analysts about how we should see these stocks that are correcting rally back soon because the declines are really "just from a lack of buying" (they are really under bigtime distribution). We can't have you stop buying now can we?

This could be the bottom of a nice little correction. I don't know. I may get crazy bullish tomorrow, but don't count on it. If we rally I'll probably be salivating over a great short entry point.

Wednesday, January 05, 2005

Let the character of the bounce tell the story

The nasdaq has finally made the dip I have been expecting - just about 3 weeks later than I expected. The character of the inevitable bounce back up will fill in a lot of blanks about the current state of the market. The naz is at its lower bollinger band and 50 day moving average, so the best case scenario right now would be for the market to turn higher from here. I'm watching to see if the volume comes in just as high, or higher than it has been for the steep decline over the last 3 days if the bounce does come. It would be suprising because the volume has expanded a great deal for the decline. There is a lot of money on the sidelines because of portfolio rebalancing for the beginning of 2005, and a lot of speculative excesses have been given a good shake: NGPS, ANTP, TAYD, and many others that have more than doubled in the last two weeks have lost between 20 and 50%. However, we are in a rising interest rate environment, so caution is the name of the game.

My current holdings are SIRI @ $7.42 average cost, and ESMC @ $8.02. Both have shown strong support and held up very well during the last three days. It is too bad about LSCP and TASR breakouts failing, but the weak volume on the breakouts was a big red flag.

Sorry this post isn't more structured, I'm in a hurry.