With the book to bill ratio coming in as high as it did today, I expect the market to rally tomorrow, that is a no-brainer. But when looking at the tick action today using Worden's indicators, what I see is selling going on into these rally's. I checked all the major stocks, IBM, DELL, INTC, MSFT, etc and they are all showing selling while new highs are being made. What Jerry is saying is correct, higher prices without sufficient volume results in churning at these tops. There is a lot of money being thrown at the market lately, and a solid correction is needed now as much as it was healthy to get the July correction. The market might put it off until next month, thereby making it hard on all of us holding Dec Puts. I hate it when we get near expiry and all we have is a few days of possible economic news to either make or break our option choices.
At this point, I don't want to "fight the Fed". Greenspan has given a clear warning to the markets that at some point the Fed will have to intervene. Cutting the margin rate is one of the options before raising interest rates. Until inflation numbers document an overheated economy, there isn't much else he can do. It was obvious that investors in other countries put more weight to his remarks than those in this country. I think the smart money is using this present rally to continue taking money off the table. |
