Get Ready to Go Down
The market has gone up for the last couple of weeks, making August a good month relative to the pain inflicted in June and July.
However, more often than not, September is a bad month for bulls. And the recent run up only makes Sept even more susceptible for a sell off.
I would look to lighten up on your long positions and wait for more attractive prices late September and October to get back in. In fact, based on my previous post titled Market Outlook, you should have already been selling into the rally.
Wishing you a very happy and relaxing Labor Day.
– Faisal Laljee
we started an aggressive sell program on wednesday when the nasdaq crossed 2175 and keep
selling an d shorting into thursday and friday. Starting
around 1pm friday the nasdaq index and russel 2000 had 5 seqential breaks to the downside.
the friday buyers did not get
much value for their money.
ISRG starter bounce day 2
92.00 > 95.25 we see how
tough it is.
Since everyone has been busy dishing out ?technicals? over the past week, here goes!
In May we posted a short comment on one of the blog sites that the next few weeks there would be higher volatility in the market place. The VIX picked up substantially for about five weeks. Then everything wet back to being quieter than average which seems to be the new normality for 2006. Then the market started to come back. At the time we clearly stated that we were in the throws of a sector rotation. We got through this trough and ended up more or less back where we started.
There is just one notable difference. Half the investors are feeling bearish because their stocks went down. Half the investors are bullish because their stocks went up. Notice that during the second half of May through the first half of July, the sentiment was far more bearish than it is today. If you look at the Ticker Sense site you will notice that today we are at a 50/50 market sentiment standoff.
The bottom line is that those investors that benefited from the sector rotation are bullish and have every reason to be so since they are holding the right stocks. What is more important is that we have completed the first half of the rotation! The second half is coming now.
In the first half, any stock considered to be a non recession proof consumer discretionary spending type got clobbered. Likewise in the first half of the rotation the market remained undecided as to which sectors would be the darlings of 2007. The market is still trying to get a grip on the energy sector, computer software and telecoms. Essentially the market has concluded that there isn?t much downside risk to the likes of JNJ, GE and PG as they are considered to be recession resistant. We didn?t say recession proof, just resistant and that?s good enough for now. The analogy is with a water resistant and water proof wristwatch. If you have a water resistant watch it should hold up in a light shower. Take a plunge with it and you?re up a creek without a paddle.
In the second half of the rotation cycle, any non recession resistant stock is going to get clobbered again. The question is which sectors will benefit from the rotation. In addition not all the big money that the mutual funds took off the table has gone back into the market to date. As we all know the end of year clock is ticking away. Methodically, funds do not like to show big cash positions at the end of the year. The most likely scenario is a short term increase in volatility for 4 to 6 weeks, during which specific stocks are unloaded and to a lesser extent others are acquired. This is then followed by a second buying spree before the end of the year once the mutual funds feel that they have a better picture for 2007. Then again they could come together to beat the ?end of year rush? and September could turn out to be the best month of the year!
So much for technical forecasting, we just don?t see the point of all of these hypotheses.
This is a personal comment by a CrossProfit analyst and may not portray the opinion of CrossProfit.com.
http://www.crossprofit.com