Patience is a Virtue 10-21-05

Good Afternoon.

The Bulls need to gain some respect today near the close. However, their job is not an easy one at this moment in time. Yesterday's sell off created short-term technical damage that cannot be ignored. Should the Bears exert their strength into the close, we would not be surprised to see the selling pickup, likely continuing into early next week. As long as the NASDAQ can hold the 2035ish support levels the makings of our expected intermediate and long-term rally are still valid.

Many readers have inquired as to why we would not attempt to trade that type of potential short-term decline to NASDAQ 2035. After all, isn't a 2% move significant enough to play? Our answer is simply this: We are not too proud to admit that we may be wrong with our trading efforts. In our view the risk/reward for being wrong at this juncture in order to try and capture a measly 2% is simply not logical in light of our extremely Bullish view.

Obviously we will not be wearing smiles into such a decline. Furthermore, our resolve may even get a little shaken near the retest of the bottom (we are only human). However our approach to the market has clearly morphed into a "buy the dip" strategy from an aggressive trading strategy. We intend on staying at least 60% net long for the foreseeable future. Our opportunities to lighten our exposure down to 60% will likely come from much higher levels if we are patient. Only when the markets start pushing to the upside capturing the general headlines on your local news will we consider bringing our exposure down to the 60% level or below. Notice that even under those circumstances we are reluctant to be mostly out of the market. We expect this Bull to run for a couple of years.

Readers should not feel discouraged that we have abandoned trading; rather we are encouraging all of you to throw horns onto your trading style. It has been so long since traders have seen a real Bull market like we are expecting that it's probable most traders are rusty. The big money was made in 1999 by the "dip buyers" who stayed mostly invested not the "all in - all out" trader type.

Google (GOOG) is holding up too well to expect a sharp sell off at this point. Although $350 was everyone's favorite sell target, the fact that is still remains in range is an indication that $350 will soon be support. The Bears are strutting their stuff a little early today. That's fine with us, because the earlier they get to work the more opportunity they provide the Bulls to pull the rug out from underneath near the close. This market need only show two back to back positive closes to create the momentum. Traders need to be patient.

Buy the dip!

___________________________________________________
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