Well we got a bogus rally Tuesday
morning as hope came into the market once again on the 'success' of the
auction of the Fed. Remember, I wrote this weekend, we will rally once CNBC pumps the trumpets about how this was a great auction BLAH BLAH BLAH. But it doesn't look like much of a rally.
I mentioned Monday morning [Who Will Be the Last to Fall], that the pattern last time around of correction was: teflon tech stocks, then solar, then agriculture, and infrastructure.
Well later in the afternoon we started to see the teflon tech stocks begin to succumb - Google (NASDAQ:GOOG) and Baidu.com (NASDAQ:BIDU) fell to 50 day moving averages (I bought a very tiny amount of each since I was very underweight these names)
Then solar weakened.... but fertilizer held strong.
Today fertilizer looks like it is starting to weaken - I sold 100 more shares of Mosaic (NYSE:MOS) to lock in some profit but won't drop it below 2% of the fund come hell or high water. My hope with these names is once again get them around the 50 day moving average and be able to layer in more buys there. With Potash (NYSE:POT) this would be down at $116 (not too far now) and Mosaic $68 (quite a distance).
So we are at an interesting cross roads - some of the most loved stocks in the market especially in tech are already at key support levels. During the worst of the mess in November, Google never closed below the 50 day moving average. But we are already there today.
My thesis would be the bulls would put up a fight in the 1440s area (which they did with a bounce yesterdayAM) and if/when that breaks, the real fight would be in the 1400s area. Thats where a double bottom sits (August and November lows). A double bottom simply means a place where the market fell to twice.
Now in general, triple bottoms do not hold... meaning if
we get back there, the odds would be this 1400s level would not hold.
No guarantee, just saying this is the 'odds'. But I do expect a "stand"
to be made there as the "invisible hand" realizes this is the level to
hold; if it breaks, Katy bar the door. On top of this, all major indexes
closed below their 200 day moving average as of 4 PM Monday -
another bearish sign on the technical side. But again, nothing straight
down, and nothing straight up - there are always weigh stations along
the road. But the trend seems to be clearly in place (down).
At this time I just don't see a great catalyst to buy. I can see Research in Motion (RIMM) earnings report possibly bringing in buyers to the teflon tech stocks later this week but even a good report like Best Buy (NYSE:BBY) gets treated with selling. Remember I sold this name at $50.50 Monday [Closing Best Buy Ahead of Earnings] - it actually had a nice report and its down nearly 4% today. So you can't win for losing.
Remember there are times stocks (and the market) go up on bad news. And times when stocks (and the market) go down on good news. We seem to be in the latter. Hence no reason to be a hero here. The markets were slightly green yesterday, but there just doesn't seem much of a catalyst to get too bullish, and if the indexes reverse and go red it would yet another bearish signal. I get the hunch a lot of people are going to the sidelines (institutions), are happy with their haul for the year, are counting on their year end bonuses, and do not need to take risks going into the last week and a half of the year.