Monday, November 12, 2007

Rotation Tanks

The new theme is continuing out there again today - leadership names are correcting further while the broken stocks are showing some strength. The financials are higher a second day today and now retailers, airlines and the broad market indices (Russell 2000 and NYSE) are either rising or showing resilience to the selling as well.

Up along the other side of the tracks, however, the market continues eating its children. Leading, higher relative-strength energy groups, solars, steels, fertilizers, metals and indeed the NDX Being-Supremes are getting woodsheded again.

What's going on then?

Well, volume is lower on both the Nasdaq and the NYSE, market breadth is relatively flat and new 52-week lows are not expanding from Friday's level. This suggests we are not going to see anything too severe just now (from here at least). Instead we are seeing a rotation of selling out of the depression stocks and into where gains are still to be had. Buy the C and sell the G; something like that.

This isn't particularly bearish, but it's not that bullish either. It's a kind of gut-check pause. Higher-up names and groups are selling-down towards the rest of the market, perhaps while we prepare for a test the August lows.

Once everything is more or less down to that level we should be ready to mark either an intermediate-term bottom or else break-down and start what would likely become a much more serious wave of selling.

Did that make sense?

In a nutshell, anything well-above the August lows is in the fast-lane headed down the last few sessions and those doghouse names and groups near the August lows already (or well below in some instances) have stopped hemorrhaging.

The Dollar is bouncing, Crude is selling, Europe was holding, while Asia saw further significant selling. I've been hot-dogging out-and-back-in-again my index shorts all day and I'm keyed mostly on the NDX still for now.

Overall though, I am backing off and taking profits short for the moment (the foot has been less and less on the accelerator as the day has progressed).

I'm not sure a bounce here would be particularly strong (if we bounce) and I would be happy to sell into whatever it can manage. Also, if we can't bounce in this condition I will sell it again later in the session today or early tomorrow. I don't mind selling lower if the internals justify it.

The NDX is down 1.23% and the Dow is higher by .44% at this writing.

1 comment:

Bozo said...


If you own any energy stocks, sell them NOW. Buy DUG, an ultra-short.

I see you are in Berkeley. I am in Lafayette. Nice to chat with you.