Financials Are Flying, Tech Is Weak - Don't Argue with the Algorithms

A very strange day - financials, especially those rescued by the government are flying today - everything from AIG to Fannie Mae to Bank of America. Meanwhile technology stocks are weak by and large after being the market's favorite for weeks. And somehow I've been stopped out of 3 long positions. (Looks like Ocwen Financial (OCN) was pummeled since I sold it yesterday morning)

Won't try to explain it, there is no explainin' anymore. This is what the algorithms are doing today - respect it. Our 4 hour correction is over and it's time to cream some bears, it appears.

I had a stop loss for Quality Systems (QSII) outstanding, but mistakenly it seems to be for the entire position; I had been planning on keeping 0.1% around. Apparently the whole thing went early this afternoon. This company reported a pretty bad earnings report, but for some reason was not affected by it at first. Now it seems to be. The stock fell from $54 to $53 first thing this morning and since then has been churning in the mid $52s to $53 area... we were stopped out at $52.85. A close back above $54 would negate the bad formation forming, and let me stress again the overall stock market is 70% of the story nowadays, so if we begin a new leg up, this stock should reverse back through the line it crumbled under this morning.


TriQuint Semiconductor (TQNT) finally fell to a support area ($6.50) - so I am increasing from my starter stake of about 0.2% to about 2% as we hit the 20 day moving average. I'd much prefer to buy lower,but I am trying to be somewhat bull- oriented and finding something to purchase.

Similarly Skyworks Solutions (SWKS) is also weak today and is back at its 20 day moving average ($11.50) so I'm adding 1% to our 2% exposure.

With both TQNT and SWKS if the market corrects (don't laugh) - I'll be paring these if they fall below the 20 day in a meaningful way since there is a lot of hot air between the 20 day and 50 day. I'd much rather be a buyer lower for both.

Buying the stocks dipping to support really has not been the way to win of late - you want to buy the stocks running away like mad nowhere near support as they seem to go up in relentless fashion. Sometimes the way you invest is in vogue and sometimes not. Pure momentum guys are running the market right now, and that's not my style - but if you want the fast money you want stocks making new highs and nowhere near any support line... those are unstoppable right now.

Disclosure: Long TriQuint, Skyworks in fund; long TriQuint in personal account

Comments

[whidbey:]

Yes, strange. The technical analysis and the Fibs say be careful, a pull back is due somewhere here. I think It will be shallow, and then try for 7800 Dow and 1200 for the SP. Less sanguine on gold, but it is looking up. Longer run PM likely to behave better on the long side?

Aug 05 06:37 PM

[Mad Hedge F...:]

mfkc. Welcome to the new bubble. In four months we have gone from 35% below the 200 day moving average to 15% above. It turns out that 1,000 in the S&P 500 is 38.2% recovery of the fall from the 2007 peak, a great Fibonacci number. DeMark indicators are showing that buying power is getting exhausted. Daily sentiment indicators are 88% bullish. RSI’s and oscillators are over extended. Every day the buyers show up, marching in lockstep with military precision, to give us our needed spike up at the close to keep the rally alive on the charts one more day. Worst of all, I am getting deluged with emails from subscribers who, having stayed out all year, are asking if they should start buying now, and buying everything. All of this, and we still have the second half of the “W” to discount. If the American stock market was the only issue, I wouldn’t really care, since most of my longs are overseas. But if the US rolls over like the Bismarck, emerging markets, foreign currencies, commodities, the energies, and junk bonds will be dragged down with it, because everything is so interlinked these days. There will be no place to hide. I think the glass half full crowd is coming to the end of their run, so I would urge investors to pare down some risk. If your friends stay in, and they make a ton of money, that’s fine. Just let them buy the next round of drinks.

Aug 06 11:15 AM

[TucsonSpike:]

If you would like some insight into why the financials are doing so well this is a "must read" article. It explains in detail why the worse shape a bank is in the higher are the reported profits.

www.bloomberg.com/apps...

Aug 06 02:22 PM