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Terrible End To A Mostly Bullish Day

|Includes:AXP, LPIH, PIR, PPHM, SNTS, SPDR S&P 500 Trust ETF (SPY), VXX

Keeping a relatively short update tonight but, the late day sell-off was a bit concerning.  The technicals beneath the sell-off were ugly and my thesis is that computers ran most of today once again.  Talking to and reading analysts updates made me wonder where all the buying was coming from as most were reporting taking profits and moving towards cash rather than buying euphorically like the chart would make one think.  This disconnect makes me feel we are seeing more computerized programs running the show which is great for the bulls in the meantime but hard to find an “edge” on how long it will last.

The late sell-off was concerning and since we are overdue for a pullback, we could see some weakness tomorrow morning.  The trend is clearly up and dip buyers have been aggressive at buying any intraday pullbacks so, I would expect the same to take place.  Without a healthy pullback, it becomes increasingly hard to buy overextended stocks.  A red day every now and then is actually healthy.

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IPATH S&P 500 VIX Short Term Futures (NYSEARCA:VXX) has been beaten up lately so I took a moderate-sized position Wednesday and also started a tracking position in Pier 1 Imports (NYSE:PIR) the other day.  Retail was down today so, that did not help PIR but, retail should be a healthy seasonal trade with the upcoming holidays and high expectations.  I went a bit speculative this afternoon and started a position in Peregrine Pharmaceuticals (NASDAQ:PPHM).  This position is small as it has a bit of a prediction involved, which I rarely do.  PPHM is releasing phase 2 clinical studies on a cancer treatment at the Neurological Surgeons Annual Meeting this weekend.  My thesis is simple and I expect positive results from the release.  The company already knows how the studies have been going so, why would they release poor results at this annual meeting?

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In other news, I took some profits in Santarus (NASDAQ:SNTS), Longwei Petroleum Investment HLDG (LPH), and American Express Co (NYSE:AXP) to reduce some of my long-side risk and judging from the late day sell-off, that may have been a great move to do so.  Again, I don’t expect a large pullback right now but, I am expecting some moderate weakness unless the computers all turn to sell.

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As always, do your own homework to see if you agree.  Have a good night and I’ll see you in the morning.  Good luck out there.

Mike

At the time of publication, Kudrna was long VXX, PIR, PPHM, SNTS, LPH, and AXP but positions may change at any time.




Disclosure: Long VXX, PIR, PPHM, SNTS, LPH, and AXP but positions may change at any time
Stocks: SPY, VXX, PIR, PPHM, SNTS, LPIH, AXP