Teflon,
I listened to your opinion and did not short into the rally today. But I will tomorrow if the employment data is bad.
To answer your question,sir.......
1) Net sector is in a bear market. Face it! The market cap of nut sector has grown so such a level that overhang and upward resistance will kill any meaningful rally. I am not totally impressed with today's reversal. Maybe tomorrow we will have another wakeup call. Just about 2 months ago, we had a nice Nasdaq 130 point swing one a certain day and the market closed very strong only to give up all the gains the following day. And actually even more.
2) Net sector again! This is a typical technical rally and that lows will be visited in the following weeks, arguably early Sept. Look for further penetration and margin calls then. The volume in nuts today is good only for a short term bottom. And the nut sector won't make any meaning recovery until AOL stops bleeding and joins the party. Nut is in a lower low lower high cycle and most of the major nuts have completed a textbook head and shoulder chart. I have not felt the maximum pain although I do know that lots of daytraders have gone broke on nuts in the last months. Unfortunately, nut sector is going to be so huge to the whole market sentiment.
3) Typically Sept. and early Oct. provides the darkest period in the market. This year, with Y2k fuss looming at the end of the year, I expect the dark period to remain longer. Frankly, the thing that really bothers me is that we are only in the early phase of a correction and yet the tech is down so much. Blame it on nuts?
4) Interest rate! We are likely to get a hike this month. I bet every trader will have this in mind: Do we have more rate hike coming in the months? It was 3 rate cuts that saved the market from total crash. What will 3, or even 4 rate hike do to the market? If AOL is indeed trending down to low 60s, we are not far from a fearful bear market.
5) In the past years, market reversal always follows a bloody day or days in both DOW and Nasdaq. We had a reversal in 97 after a DOW down 550 point day. Last year, it was a series of DOW 200-300 point down day and frankly, it was rate cut that saved us from a total mess. I have not seen that kind of situation this year.
6) Foreign market are providing more attractive short and long term returns. Asia is recovering (I put my $$$ in Japan 3 months ago and think that Nikkei should reach 20k within the next 6 months). Basically US market is no longer as attractive as it used to be......this will certainly affect the money flow into the US market.
7) I never watch CNBC so I can't comment on their lame claim. I think that the market has priced in one rate hike and a neutral stance. If the number keeps getting bad, and AG keeps the tighting biase, look for DOW at 10k or below and Nasdaq at 2350 or so for strong support. That is, another 10% to go for Nasdaq.
I mainly trade on sentiment. I figure that's the best way to make $$$. And I still call the market sentiment very negative.
good luck,
larry |
