Jury Still Out on Market Bottom 10-10-05

Good Morning.

Overseas markets were mostly positive helped by the deal reached in the German Government regarding Angela Merkel. Oil is down however, this is not providing any comfort to the stock market. Xilinx (XLNX) had weak guidance and caught a downgrade which is putting very heavy pressure on the stock. This is spilling over to most of the Semiconductor names which is in turn dragging down the NASDAQ.

The NASDAQ is likely to chop around between 2069 and 2120ish. The sudden downward pressure that the market is experiencing since 8:50am this morning is largely due to the tepid buying interest from the Bulls. They have been so badly beaten last week that they are easily spooked and the XLNX news is as good an excuse as any. Traders looking to sell are forced to dump positions into a vacuum.

Remember, the process of making a bottom is exactly that; a process. Several failed attempts by the Bulls should be followed by more positive divergences on each attempt. Declines such as this morning provide us with an opportunity to analyze whether such divergences are materializing. This decline will be our first indication as to whether or not the stock market is indeed searching for a bottom or simply pausing before a more accelerated decline. Currently, the dearth of buying, although expected, is an indication that too much fear and skepticism still exist. Therefore, it is too early to deploy a significant percentage of our cash into this decline. We will be looking for stronger internals than we are currently experiencing before we get more aggressive. We are however, encouraged to see bottom-fishing interest taking place in recently badly beaten up names such as Dell (DELL) and Yahoo (YHOO).

Overall this decline has afforded us the opportunity to nibble slightly on Merrill Lynch Semiconductor Holders (SMH), but we are keeping the rest of our powder dry.

Still 65% net long.

Hope You Trade Well.

___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (“KTB”) are for informational purposes only and should not be relied upon in making investment decisions. By using this site you agree that Kleiner Capital Management, LLC (“KCAP”) and its principals are not liable for any action you take or any decision you make in reliance on any content. Please be aware that there is no commitment by KCAP to update the KTB. Furthermore, there may be inconsistent timing and follow up (if any) of posts.
None of the information on KTB is considered individualized investment advice and should not be construed as a recommendation or solicitation to purchase any securities. Reliance on information provided on KTB in no way establishes an advisor-client relationship. Investors are encouraged to seek the advice of a qualified investment professional prior to investing funds.
Clients of KCAP, as well as the firm’s principals and other employees, may be invested in securities discussed at KTB. However, any mention of said securities is not intended to influence market conditions for the security to the benefit of KCAP clients and/or principals and employees. KCAP is not affiliated with any advertisers on this site and does not endorse any of their content. For additional information and disclosures, please visit www.kleinercapital.com.
The information on KTB has been furnished from sources we consider to be reliable, but no guarantee is made with respect to accuracy.
___________________________

Click Here To E-mail Comments