Days like this are what make this MDA stuff exciting. The divergences that the market threw at us today were enough to make anyone's head spin. A very strong transport move coupled with the nasdaq getting creamed for 76 pts. Gold going higher,,,a jump in the VIX,,,cyclical stocks coming back to life,,,tech's crumbling. How do we make heads or tails out of all this info. Despite the deafening noise, the market will always offer us the clues needed to tilt the odds in our favor. Unfortunately for us those clues can be very short in duration and often requires the trader to make ultra-fast decisions. Otherwise, Mr. Market will take your head off. Whether you prefer to call Mr. Market a Specialist, MM, or Smart Money really has no bearing on things. He or she (sorry ladies) is the 800lb gorilla that we face every day when we turn on our computers. And remember we are still the lucky ones in that we choose to utilize a computer. The average guy out there still looks at the newspaper. Talk about a disadvantage. The fact that these guys can go either long or short the shares of the companies whose prices their controlling. As well as having the ability to see the market (by way of the book) gives them an overwhelming advantage. However, their biggest challenge is how to cover their tracks. I believe one of the ways they accomplish this is by market volatility. Today is a perfect example. They blindsided us with what on the surface looks like a tech debacle. Internets crumbling, plus many of the high tech generals falling apart. Then to throw confusion into the mix they threw the advance in the trannies at us. Why? As long as the average investor stays confused he or she will most likely push out (into the future) any decisions about investing into the market. Always waiting for a clearer picture to emerge indicating it is NOW SAFE to get into the market. Does that sound crazy or far-fetched? Perhaps. But then again how many times on this thread, ESPECIALLY during this whole consolidating phase, have we heard that "I am waiting for the advance-decline to improve first" or "As soon as these indexes improve THEN we will get a green light to come back into the market." In the meantime the DOW gains 1500 pts. While some of the tech stocks power into record highs some doubling in weeks. Trust me I am not trying to belittle anyone for staying out of this recent advance. I truly respect anyone's decision to do so. The point that I am trying to make is that this market volatility is a wonderful tool utilized to keep the small guy off balance while the smart money goes about accumulating a position in the stocks they control. By the time the avg. investor finally gets the green light to get in - the stocks are usually in their final blowoff stages and the smart money is distributing their shares and realizing fantastic gains. Because I believe things on wall street are seldom as they seem I usually suspect any move or any sign that appears too obvious. Call me paranoid.
Today's action, however violent, continues to point towards higher prices. Because I follow so many companies and indexes let me just say for lack of time and space that the impression that I got from today's trading was nothing more than stocks correcting after making huge gains. Companies like RNWK, LVLT, QWST got hit pretty good today. But in the context of the big pictures their prices are still in good shape. Of course I think the way to play it here is to watch how things play out the rest of the week. I would NOT initiate any new tech positions until I see prices firming or reversals in some of the key players.
My gut tells me that today's action in the NAZ was nothing more than another fakeout before the breakout. If I am wrong we should see the naz continue its sell off. And the rest of the market will eventually follow. I honestly don't believe that scenario will play out.
Time will tell.
SO |
