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June 4, 2010

|Includes:AAPL, ARUN, CRM, FSLR, GIL, GMCR, GOOG, GS, MA, Outerwall Inc. (OUTR), OVTI, PCLN, V, VMW

While Investor’s Business Daily may say this rally is “under pressure,” to me it’s as dead as a doornail.  They cite two historical examples of distribution days hitting the market within two days of a Follow-Through Day (NASDAQ:FTD).  Those days happened in early October, 1966 and August, 1982; both produced a mere .22% drop on the Dow, though the action during that day in ‘82 was quite a lot wilder.  To my mind, however, there’s simply no comparison here.  The carnage on Friday was far too harrowing. 

 

“Never trust the teller, trust the tale.”
- D.H. Lawrence

 

As I wrote on the first of June in my last report, I‘d covered all my shorts and was sitting in cash as it seemed to me that the sellers had backed away.  With the next day’s FTD I bought the best merchandise that was out there: CSTR, CRM, VMW, OVTI, ARUN and GIL, though I did keep my positions on the conservative side as the power of the move and the lack of quality merchandise made me somewhat cautious.  March, 2003 this was not.  Still, when we get a buy signal we buy, no questions asked.  Well, it was certainly short-lived, as I am back to a 100% cash position.

 

Now I’m sitting on my hands and waiting to see what will happen next.  Even the most fleeting of glances at, say, the S&P 500’s chart should be enough to convince somebody that the chances are this market is heading lower from here though.  So, with this in mind, I am looking to short any rallies at this point and focusing on those stocks that the institutions have been busy piling into over the past year and, assuming the market continues to weaken, will now have to get out of, stocks like GOOG, GMCR, V, MA, FSLR, PCLN, GS and, yes, even a stock like AAPL.  I short no stock before its time, however.  Like in the army, it's "hurry up and wait" time. 



Disclosure: 100% Cash
Stocks: OUTR, CRM, VMW, ARUN, OVTI, GIL, GOOG, GMCR, V, MA, PCLN, FSLR, GS, AAPL