Thursday, June 07, 2007


We have wiped out more than 3 weeks of gains in 3 trading sessions. Amazing. The bull goes up the stairs the bears goes out the window is an appropriate analogy. Dow down nearly 200 points with 45+ points down in the Nasdaq and 26+ points down in the S&P 500. We finished near the lows of the days and the worst part atleast for the bulls was that panic selling was no evident. The selling was slow and steady mostly institutional via block trades. Even the strong names earlier on like AAPL AMZN GOOG RIMM CROX allmade big turnarounds towards the end finishing lower or barely higher. As far as sectors and industries go utilities, transports, gold and silver, housing and oil bore the brunt of the punishment. Volume was enormous with the Qs trading well over 200 million shares, something it has not done since early March. Three down days on heavy volume can break the back of any bull market and while I am not predicting the demise of this bull, it is something that needs to be kept in mind. In the following days lets see if buy the dip still works or if the new strategy is sell the rally.

When there is only positive news about a company, the time is usually ripe to short it since it often tends to be downhill from there. On that note, Apple appears to be an excellent candidate for a short according to this financial writer.

Not too long ago Jim Cramer , yes the bald headed screaming lunatic, was touting Monster as a buyout candidate. Shares of MNST were beaten up today following the resignation of it CFO. The CFO resigning is usually a sell sign.

Hedge Funds earned 2.43% on average in May trailing the S&P which returned 3.49%. In recent months investors have railed about the large performance fees hedge funds charge in lieu of their sub par performance. One needs to keep in mind that hedge funds often outperform in times of volatility or declining market. When markets rise steadily, hedge funds often underperform since by definition they are hedged.

Case no. 060607 Citi v Citi . How are subscribers to this analysis ever supposed to make any sense of all this ? Is that how they make decisions on their trading desk too ?

My long position got beaten up today to the tune of 1.5%+. Luckily my double inverse ETFs came to the rescue allowing a break even. I may start selling some of my longs depending on tomorrow and next week. Lighten up a bit and go in cash. On the other hand I may buy even more possibly even doubling on stocks like MMS MU SNDK RVBD RACK FFIV PRAI OXPS OMRI NYX NTRI HANS HNR BSQR KNOT UXG GRZ KRY JSDA. I am not using any leverage and I have the ability to use quite a bit. So we will wait and see.

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