Tops Take time! 1/13/05
The market started losing momentum today like a balloon tied with a loose knot. Slowly the air is being let out under the aggressive bovines' noses -- as they sit in denial. Evidence of the stubborn bulls is apparent in the late rallies that are still occurring near the close. However, for anyone who knows how to read a chart, they will see a series of lower highs and lower lows starting to form in the NASDAQ. Maybe due to Friday the Thirteenth, their superstitions blinded them to the reality of the dangers inherent in this market.
Experienced traders know that tops in a market are a process that takes time, as opposed to bottoms which are usually somewhat abrupt. Strong rallies, like we have just experienced do an excellent job at sucking in fresh money from the wide-eyed slap-happy public and amateur Hedge funds. Unfortunately for them, Mr. Market is always malicious in offering false hopes and excitement before administering a severe lesson in the struggle to extract sustainable profits from the market.
There is an old adage on Wall Street that says “It is not how much you make but how much you keep”. You would think people would have learned their lesson from 2000, but when the juices get flowing, “Irrational Exuberance” comes to the forefront.
The signs are clear that the market is forming a temporary top. Careful observation of the volatility index (VIX) shows higher levels of fear are imminent. This will coincide perfectly with the beginning of earnings season next week. Just in time for a horrendous “sell the news” reaction.
Stubborn bulls take false comfort in observing the high price of oil for the loss of momentum in the market. They take comfort in the notion that the imminent decline of the commodity will further fuel the upside in the stock market. Careful observation of the correlation of the stock market and the price of oil recently, shows that declines in oil prices is coinciding to the declines in the stock market. Apparently, the bulls have “high-fived” themselves so often recently that they must have poked their eyes out to not see this correlation. Oh well… some people never learn – and that is what creates opportunities for others
If You Held a Taser to Our Head:
The NDX has formed a double top formation over the last couple of days. This is particularly dangerous, especially if further lower highs are reached. Your friendly neighborhood KCap team continues to be very concerned about the next big down move in the averages. The internals have not improved and the market is very overbought heading into earnings season that will offer the perfect excuse for a sell-off. We are currently 25% net long and looking to scale into semi-conductor shorts during further strength early next week.
Hope you traded well and are set for a restful fun weekend.
Sorry for the late post.
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Experienced traders know that tops in a market are a process that takes time, as opposed to bottoms which are usually somewhat abrupt. Strong rallies, like we have just experienced do an excellent job at sucking in fresh money from the wide-eyed slap-happy public and amateur Hedge funds. Unfortunately for them, Mr. Market is always malicious in offering false hopes and excitement before administering a severe lesson in the struggle to extract sustainable profits from the market.
There is an old adage on Wall Street that says “It is not how much you make but how much you keep”. You would think people would have learned their lesson from 2000, but when the juices get flowing, “Irrational Exuberance” comes to the forefront.
The signs are clear that the market is forming a temporary top. Careful observation of the volatility index (VIX) shows higher levels of fear are imminent. This will coincide perfectly with the beginning of earnings season next week. Just in time for a horrendous “sell the news” reaction.
Stubborn bulls take false comfort in observing the high price of oil for the loss of momentum in the market. They take comfort in the notion that the imminent decline of the commodity will further fuel the upside in the stock market. Careful observation of the correlation of the stock market and the price of oil recently, shows that declines in oil prices is coinciding to the declines in the stock market. Apparently, the bulls have “high-fived” themselves so often recently that they must have poked their eyes out to not see this correlation. Oh well… some people never learn – and that is what creates opportunities for others
If You Held a Taser to Our Head:
The NDX has formed a double top formation over the last couple of days. This is particularly dangerous, especially if further lower highs are reached. Your friendly neighborhood KCap team continues to be very concerned about the next big down move in the averages. The internals have not improved and the market is very overbought heading into earnings season that will offer the perfect excuse for a sell-off. We are currently 25% net long and looking to scale into semi-conductor shorts during further strength early next week.
Hope you traded well and are set for a restful fun weekend.
Sorry for the late post.
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posted by Kleiner Capital Management, LLC. | 9:19 PM
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