Anxious Bulls vs. Patient Bulls

There are numerous signs that demonstrate that we are at the bottom. Almost without fail, a major institution has to go "out". Refco's (RFX) potentially imminent demise provides this ammunition. Furthermore, bottoms are notorious for uncovering bad apples. In addition to RFX we have our buddies at Samsung (SSNLF) and other Semiconductor companies that have agreed to pay the largest fines in history for price collusion. There is also an endless supply of hate mail being shot at anyone who holds themselves out as a stock market professional. The list goes on and on…get the point?

There are two types of Bulls, anxious versus patient. Our largest concern is to which camp we want to place ourselves in. The anxious bull camp is willing to step up now despite the fact that they may endure further pain over the next few weeks. On the other side of the equation are the patient Bulls who are happy to buy late rather than endure any suffering at all. If you are a Bull you are most likely trying to decide which type of bovine you most resemble.

The simple truth is that the choice becomes a zero-sum game. Anxious Bulls who load up the boat now will likely not be able to withstand the "pain" if they were wrong in their timing. The stock market is likely to at least shake out a portion of their holdings inevitably forcing them to buy back at higher prices. Patient Bulls will certainly avoid pain but will be faced with the difficult choice of buying significantly higher than they originally anticipated. The market usually pulls back on them immediately after they buy, thus shaking them out of some of their positions. Only the Bulls who are properly positioned to withstand pain without being rinsed out of the market will truly capture the lowest prices. That is the reason your friendly neighborhood Kcap Team has been positioning for this event during the last several months.

The stock market continues to exhibit the "good stuff" but the Semiconductors are not joining the party. Although this is troubling, we will allow them a one or two day vacation due to their superior performance yesterday. They had better get their act together by mid next week or we may have to reevaluate the timing of our position.

Steady as she goes for now.

We will be kicking off the weekend a little early today. We'll see you on Monday.

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