Thursday, November 15, 2007

Hold the Malaise

A Barnacle of Truth...

A broken market, when OVERSOLD, has a tendency to bounce sharply, but in 1-day hurrahs.

The CNBC faithful and virtually everyone I read or listen to was expecting Tuesday's heroic upswing to sustain at least throughout the week. So far that has not been the case.

Oversold readings are for losers.

Seriously, you can sharpen your technical pencils and pinpoint spastic-stochastic oscillation extremes until you're blue in the face, but at the end of your life you'll discover that trade had a negative expectation value.

If you look at crash-like declines of the past, in the indices as well as in individual equities, you will find one distinct commonality. They tend to come from an oversold condition.

So while you might see a majority of positive results stemming from buying these oversold set-ups, that is rendered insignificant once one little crash smacks you in the face.

Based on oversold technical conditions, Enron was a buy all the way to ZERO.

Ok, with that out of the way let's get to the point of the day. The market is under pressure again and breadth is sufficiently negative, but so far the major indices have not managed to hit fresh lows. You know I like to complain - well, my short-soup is a little luke-warm here. The decline is not yet accelerating.

Volume is also drying-up suddenly. Yesterday's volume was below that of Tuesday and today volume is declining again. That is not conducive with a market that is about to break apart.

Negative sentiment, meanwhile, has shifted back to worrying, having lost the hopeful luster from Tuesday. Maria is rattled. I don't like being short when she is rattled and we are not hitting lower-lows.

Further, new 52-week lows are not expanding and the NDX is declining somewhat reluctantly compared to the other major indices; the opposite of how I would write the short-script.

What's a trader to do? Well, take profits. While I was hoping to just keep adding more and more short into an accelerating drop, this mere malaise-decline has me unloading them now instead; at least for the time being. I"m taking profits today on all index shorts. I continue to hold short retail names COH and JCG.

I will be sleeping with sleeping with one eye open, however, in case things liven again; which obv. can happen quickly.

And hey, how about that silly Fed? Like Mr. Rogers recently said, that nut Bernanke is going to print money until we run out of trees. The Fed reportedly pumped another $47B into US money markets today, another post-911 record. Last week they fixed us with $32B and the week before injected our previous high, $41B.

I'm counting just under $150B now since October 24th. Wow.

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