Gambling Junkies?

The NASDAQ did a little shakeout today when it fell to 2093. The Volatility or fear Index (VIX) got a little jumpy hitting a high around 14. As we predicted traders started to fall over themselves and add long positions rather than wait for the more obvious support levels of between 2085 - 2090. People who bought today were either poorly positioned for any kind of bounce or were simply adrenaline gambling junkies. The most horrifying thing about this is that we may have to classify ourselves in one of the above. However, we prefer to think of the Kcap Team as simply working our long-term theme and not getting overly swept away by the emotions created by the media.

Traders need to continually be reminded that unexplainable rallies are often initiated from the speculative gambling types. The so called "smart money" is usually late to the party during the past few years. Short sellers are squeezed by gambling dip buying traders and then institutional buyers are forced back into the market for fear of being left behind.

After the bell, Alcoa (AA) and Oracle (ORCL) have seemed to offer disappointing earnings reports. Remember, it is not the news that matters rather the reaction to the news. Therefore, we will view this as an excellent opportunity to examine the stock markets willingness to look past these reports tomorrow.

The ORCL disappointment concerns us a bit more due to the fact that it is a perceived fly in the ointment to our Bullish technology thesis. However, our eyes and hopes are focused towards infrastructure building as the first stage for the new technology revolution. Therefore, large software application vendors such as ORCL are not expected to deliver stellar results until much later in the cycle.

If You Held A Taser To Our Head:
We expect more jitters in the stock market tomorrow as traders throw their shares into the volcano as sacrifices to Hurricane Rita. We will continue to buy those dips in a gradual fashion with our still large remaining cash position.

See You Tomorrow.

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