The Kcap Trading Blog

"Hedge Fund Style Investing For Your Own Individual Account"

My Photo

Follow the Kcap Trading Blog and it's experienced long/short Portfolio Management Team, move for move, for intraday trading decisions AS THEY HAPPEN.

**Ranked among the top 100 financial blogs by**

IMPORTANT: Please read disclosure at the bottom of each post

Tuesday, February 27, 2007

Click Here To E-mail Comments

Gotcha! 2-27-07

Good Evening.

Do we feel vindicated in light of the fact that your Friendly Neighborhood Kcap Team has been preaching to “watch out below” for quite some time? Do we feel vindicated in light of the fact that attractive prices in everyone’s favorite technology stocks exist once again? The short answer is…not yet vindicated, but soon. Most market participants resigned themselves to the fact that the only way to make money was to chase the extended ‘momo’ stocks that have gone parabolic over the past several months. Even experienced professionals who felt extreme pressure from their client base were forced to chase stocks at prices that were against their better judgment. Tomorrow morning, those same professionals will receive calls from the same clients, ripping the Money Managers a new ‘O’ for buying stocks at such ridiculously extended prices. The money management game is clearly a Catch 22.

Since the market has been so extraordinarily unreasonable over the past seven to eight months, traders should not expect any sort of logic to magically appear on the downside. In other words, although a new downtrend may finally emerge, the amount of head fakes are likely to be abundant. Ultimately the NASDAQ should give up virtually all of its gains that have been tacked on since late summer 2006. Do not be surprised to see the NASDAQ trading around 2250 before summer 2007. However, the path to 2250 is likely to be one of high volatility as opposed to the sickening, low volatile climb that the market beast has bestowed upon us over the past several months.

Very few Hedge Funds were prepared for today’s tremendous sell off. Virtually all Hedge Funds are still very net long as we type. In addition, many fund managers have never even experienced a downtrend that starts with a day like today. The head fakes are likely to chew them up over the next couple of months.

We are not predicting that the market will continue its decline in the coming days. Rather that the coming months will be extremely difficult for Bulls and Bears alike. However, the edge will clearly lie with the patient (and we mean extremely patient) Bears. Essentially, Traders must remember a very golden rule on Wall St. That rule states: “There is a tremendous gap between where trapped, long side momentum players stop selling and value players start buying.” That gap is also known as THE DEEP “abyss”. One thing for sure, when we enter THE DEEP abyss between now and the summer, there will be no signs of Jacqueline Bisset in a wet t-shirt. Who remembers that movie?

If you held a Taser to our head:
We have increased our short exposure and will continue to add to that posture on any rallies. Now that the VIX has spiked dramatically, expect more volatility and be patient scaling into your positions. As you know from reading our posts, your friendly neighborhood Kcap Team has been fully prepared for this type of action.

Hope you’re doing 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
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

Web Kcap Trading Blog