Dripping into the summer doldrums

We mentioned in prior posts today that a close on the NASDAQ at or around 2150 could create some upside follow-through. We also mentioned that the shorts would be interested in hitting any strength at or around NASDAQ 2155 - 2160. While we are still waiting to see where the market closes, the Bears did indeed come out of their Den at around NASDAQ 2151. The illiquid condition of the market allowed the Bears to wrestle the Bulls to the ground which produced a very sharp Cliff. The Semiconductors and Small Caps however, essentially showed relative strength. Should the market recover from this Cliff and indeed close at or around 2150 on the NASDAQ, conditions will be ripe for the continuation of an oversold bounce. The close therefore takes on more importance than usual.

We have increased our exposure from Bearish to neutral. We used the Cliff to add small positions in many of our favorite names. Our cash position remains well over 40% however, which gives us ammunition if we are wrong about the expected oversold bounce.

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