That Was No Correction! 1-10-06

Good Evening.

The Bears attempted to pull the market back to the low end of the range NASDAQ 2280, but failed at 2303; although this time they were able to gain a little more traction. Unfortunately the Bulls were able to reverse the market higher near the close and brought the NASDAQ to new highs on the day. Those slap happy Bulls who think the correction is now over are totally ready to party now! Of course regular readers of this site know that we view the current environment as very dangerous. The even more emboldened Bulls have added a new level of risk to the market with today's recent action.

In recent posts we outlined that NASDAQ 2320 would be the top end of the range. Thus far this has held true. However, the Bulls have set the stage to break to new highs with today's psychological reversal. From this point on we expect to see the most intelligent and patient of Bears use subsequent strength to finally put an end to this rally.

Overall volume was essentially inline to yesterday's action and breadth was slightly positive. The negative reports from Alcoa (AA) and Phelps Dodge (PD) did nothing to temper the euphoria from the Bovines. After-hours Genentech (DNA) reported essentially inline with mixed results for their three big drugs. The market is likely to ignore weakness in DNA similar to the way they ignored AA and PD.

Lately, the market is willing to look past any bad news. The fact that Iran has restarted nuclear research which pumped Oil a little higher was inconsequential to the Bulls. The fact that Toyota (TM) is beginning to ship cars to China from FUKUOKA is also having no impact on the psychology of traders (do you think FUKUOKA is a subliminal message from Toyota to General Motors?...just thinking out loud).

If You Held a Taser to Our Head:
Your friendly neighborhood Kcap Team is still somewhat net long. However, we continue to scale into short positions in Semiconductors and are rotating out of our high beta technology stocks into more defensive large caps such as Brown Forman (BFB), Clorox (CLX), and Pfizer (PFE) to name a few. We still believe that an immediate implosion is unlikely but that the next large move in the market contains a down arrow. Ultimately the NASDAQ should see 2150 by the end of the first quarter.

Hope you traded 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