Wednesday, October 24, 2007

A Gathering of Hunters

Okay, no day-spa - the market is eating its young today; somewhat.

The internals are nasty enough, with decliners leading advancers by more than a 4-1 margin; volume is rising and reasonably heavy. The Semi's, which have been making lower-lows each day lately while the NDX again managed a slightly higher-high, is getting woodsheded; the breakdown in leader BRCM is notable.

The higher high in the NDX yesterday saw 7 names within the index trade to new 52-wk highs (NH's). The previous high on October 12th saw 12 NH's in the 100-stock index. NH's in the overall market have been trending lower with each successive rally as well. The last NH in the Dow saw a pitifully low number of NH's in the broader market. Historically, this is a harbinger for hell in a hand basket...but that was then. This is...well, now.

I'm not going crazy yet, but I am staying reasonably short. Holding Ultrashorts TWM, SKF and even the fledger QID; still short COH and DBRN as well. As I mentioned yesterday, if the market improves I have to bail on the QID, but once again I have all the confidence of rotting fruit after seeing that peekid new high followed by today's uber-pelt.

The Fed cut coming with next week's FOMC meeting is also an issue. I would allocate more short today if that were not on the horizon. However, I might take further shots on any strength ahead of the cut and I expect to be taking larger shots once it is out of the way.

New highs in all accounts again here today, so the market can't be that hot, right? I've been net-short since before summer and I still manage to make a buck. Something is not right...hoping it is the market and not me.

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