-OT--1:24PM Day Trader : This is where things get interesting.... It didn't take a Byron
Wien to surmise that the market tone had been negative for over a month. Investors
were pushing stocks over cliffs, and there were few buyers willing to risk being pulled
down by the clearly overextended equities. Recent trading favorites such as Avici
Systems (AVCI) and Blue Martini Software (BLUE) saw their shares quickly halved, as
momentum players either went short the market or went home. But don't get the wrong
impression, the 20.6% decline suffered by the Nasdaq from Sept. 1 to Oct. 9 was not
regarded by traders as evidence that the bull market had gone into cardiac arrest.
Traders simply looked at retreat as another quarterly reset -- a time when experienced
market participants look to jar the novices from their favorite names. The goal is to
shake out the weak hands, then use plunge in price as an opportunity to reload. Once
the stock regains its momentum, the hope is that the same investors who were
previously knocked out of the issue will return to participate in the story. But before
you scream conspiracy, understand that this is not an orchestrated effort. Investors
simply using years of tracking market psychology and historical trends to their
advantage.... Before returning to the market in a big way, investors/traders wanted
evidence that the weak money had finally thrown in the towel: that initial positions had
been abandoned and average-down stakes had been thrown into the fire.... We
witnessed this action Monday. In fact, it was this very panic selling that cleared the way
for yesterday's rally.... The market was prepared to build on the strength this morning,
but downgrades in the semiconductor group stopped the momentum dead in its
tracks.... For investors, this is not a good place to be. Without immediate extension of
the advance, there is no confirmation that the bottom has been put in. Traders, on the
other hand, able to view lack of follow through in a positive light, as uncertainty
associated with the failed recovery will lead to an increase in volatility.... The feeling in
the market is that investors are ready to reemerge as soon as a catalyst presents
itself. This analyst believes that earnings will provide the necessary spark. Our focus
this earnings season would be on networking, storage and the top names in the B2B
space. These are among the few groups still capable of delivering the type of upside
surprises capable of igniting an individual and sector rally. -Damon Southward,
Briefing.com |
