Welcome Back Kotter! 8-22-06
We're back with all the rest of you sweathogs after a much needed vacation.
We hope the market treated you kindly over the last couple of weeks as we urged most of you to increase your long exposure at just the right time. The setup back on Aug. 8th was indeed ripe for a rally, and a rally is what we got! The question now is whether or not the rally is kaput or has another leg up? In our humble opinion we will likely see some more upside in the next couple of weeks, perhaps culminating at NASDAQ 2200 - 2230.
In order for the next up move to materialize some backing and filling is necessary. We believe that process has started today. Blame it on the Fed's Moscow for his usual hawkish jawboning, blame it on MSFT closing at the lows of the day after it's stupendous recent run, blame it on the over extended nature of most stocks and the recent under performance of the Russell 2000, or just blame it on the laws of common sense that the market needs it's own mini vacation; but some downward pressure in the next couple of days is likely and we took defensive action.
We believe the NASDAQ will likely drop to the 2100-2120 level in the near term. We will be watching for stabilization at that level as an indication that the next up swing will be forthcoming. Only then will we get very long again for a 1-2 week trade. The next leg up will likely show outperformance in the Large Cap Tech stocks as well as the Banking Sector. Hopefully, the new highs and breadth of the market will expand as the rally gains steam. Likely areas of resistance for the NASDAQ to overcome will be 2170 & 2190.
The action from under invested Bulls and Short Covering Bears at that time should be frantic enough for the market to breach those over head resistance levels. Unfortunately, the frantic action will be more than enough to suck in participants creating an alarming setup for all involved. You see our dear readers, there is likely another large shoe to drop in the Den of Bears before this market is truly able to deliver a long lasting Bull run; but that is for another post.
Your friendly neighborhood KCAP Team has dramatically reduced our long exposure yesterday and today. In fact, we have even opened up short exposure in the QQQQ for a substantial hedge on our remaining long positions. Furthermore, we have added short exposure in Lowes (LOW) due to it's weak earnings report, poor customer service and the sickly housing sector. We have also taken the opportunity to short StarBucks (SBUX) for it's diminishing U.S. growth rate and reliance of overseas expansion. On a final note, we have shorted Cablevision (CVC) due to our disgusting experience recently with the company and being awakened to just how poorly that company seems to be run. Several contacts we made inside the company are looking to bail and we have heard numerous horror stories about the operations of the company recently. Mind you, we intend on covering these positions should the NASDAQ hit our downside targets of 2100-2120 and will likely remount these shorts at our upside targets of NASDAQ 2230ish. Either way we intend on leaning on these stocks while trading around them.
If You Held A Taser To Our Head:
Several months ago we mentioned that Microsoft would likely offer discounts on Vista in order to avoid any delays in the PC selling cycle. Today Microsoft announced that incentives will indeed take place. Despite this having a potential negative effect on margins we believe that this was a strategic and necessary move from the company.
P.S. Expect the fear of stagflation to reemerge as the largest culprit in financial markets over the next couple of months.
It's good to be back Barbarino! ___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (âKTBâ) 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 (âKCAPâ) 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 firmâs 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.
___________________________
We hope the market treated you kindly over the last couple of weeks as we urged most of you to increase your long exposure at just the right time. The setup back on Aug. 8th was indeed ripe for a rally, and a rally is what we got! The question now is whether or not the rally is kaput or has another leg up? In our humble opinion we will likely see some more upside in the next couple of weeks, perhaps culminating at NASDAQ 2200 - 2230.
In order for the next up move to materialize some backing and filling is necessary. We believe that process has started today. Blame it on the Fed's Moscow for his usual hawkish jawboning, blame it on MSFT closing at the lows of the day after it's stupendous recent run, blame it on the over extended nature of most stocks and the recent under performance of the Russell 2000, or just blame it on the laws of common sense that the market needs it's own mini vacation; but some downward pressure in the next couple of days is likely and we took defensive action.
We believe the NASDAQ will likely drop to the 2100-2120 level in the near term. We will be watching for stabilization at that level as an indication that the next up swing will be forthcoming. Only then will we get very long again for a 1-2 week trade. The next leg up will likely show outperformance in the Large Cap Tech stocks as well as the Banking Sector. Hopefully, the new highs and breadth of the market will expand as the rally gains steam. Likely areas of resistance for the NASDAQ to overcome will be 2170 & 2190.
The action from under invested Bulls and Short Covering Bears at that time should be frantic enough for the market to breach those over head resistance levels. Unfortunately, the frantic action will be more than enough to suck in participants creating an alarming setup for all involved. You see our dear readers, there is likely another large shoe to drop in the Den of Bears before this market is truly able to deliver a long lasting Bull run; but that is for another post.
Your friendly neighborhood KCAP Team has dramatically reduced our long exposure yesterday and today. In fact, we have even opened up short exposure in the QQQQ for a substantial hedge on our remaining long positions. Furthermore, we have added short exposure in Lowes (LOW) due to it's weak earnings report, poor customer service and the sickly housing sector. We have also taken the opportunity to short StarBucks (SBUX) for it's diminishing U.S. growth rate and reliance of overseas expansion. On a final note, we have shorted Cablevision (CVC) due to our disgusting experience recently with the company and being awakened to just how poorly that company seems to be run. Several contacts we made inside the company are looking to bail and we have heard numerous horror stories about the operations of the company recently. Mind you, we intend on covering these positions should the NASDAQ hit our downside targets of 2100-2120 and will likely remount these shorts at our upside targets of NASDAQ 2230ish. Either way we intend on leaning on these stocks while trading around them.
If You Held A Taser To Our Head:
Several months ago we mentioned that Microsoft would likely offer discounts on Vista in order to avoid any delays in the PC selling cycle. Today Microsoft announced that incentives will indeed take place. Despite this having a potential negative effect on margins we believe that this was a strategic and necessary move from the company.
P.S. Expect the fear of stagflation to reemerge as the largest culprit in financial markets over the next couple of months.
It's good to be back Barbarino! ___________________________________________________
The analysis, opinions and/or forecasts expressed on the Kcap Trading Blog (âKTBâ) 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 (âKCAPâ) 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 firmâs 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.
___________________________
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posted by Kleiner Capital Management, LLC. | 5:16 PM
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