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October 6, 2010

|Includes:Apple Inc. (AAPL), AGQ, AMZN, BIDU, CRM, DGP, DRYS, DSX, EBIX, EXM, FFIV, GLD, GOOG, IWM, NFLX, ORCL, QQQ, ROVI, RVBD, SLV, SPXU, SPY, SQQQ, TNA, TQQQ, TZA, VMW

“Blasted higher today on heavy volume....”  That’s how the notes in my trading journal read after Tuesday’s session.  Now, after Wednesday’s session, I could quite correctly write: “Market closed mixed on low volume, digesting the previous sessions’ big gains.”  I could, but I won’t.  That’s because while Wednesday’s action looked constructive to the casual observer, it masked what was, in fact, some disturbing weakness, as a number of high-fliers got absolutely pummeled on heavy volume.  Imagine the sellers as Cam Neely and these unfortunate leaders as Dave Tippett: http://www.youtube.com/watch?v=2yO6JjBG0Eg.  You get the picture. 

 

This is brought home all the more when you consider that my “Elite Watchlist” was down 2.9% today.  These are the “creme de la crème” both fundamentally and technically.  You just have to ask yourself: If they are gunning for these equities then what’s next? 

 

So, outside of a position in DGP, I am cashed-out.  Let there be no mistake, however, there was nothing normal about today’s action.  Caution is most certainly called for.  Give no stock the benefit of the doubt.  Truth be told, Wednesday’s session actually reminded me a little of 10/30/07, a day where they nailed all the hot shipping stocks to the tune of 15-20% in a single day, stocks like DRYS, EXM and DSX.  Like today, the market shrugged it off at the time.  We all now know what was to come.  Not saying that we are due for a repeat of that type of carnage but being long a market where they are taking out an entire high-ranked group should get you thinking….      



Disclosure: Long: DGP