6-27-06 Paradise By the Dashboard Light…or…Bat Out of Hell?

Good Evening.

The market decided to do its daily swoon surprising many traders who were expecting sideways action until the FOMC meeting on Thursday. Breadth was negative at 3:1 and volume increased slightly over the past couple of day's positive action. There was no major news to account for today's ugly action.

Semiconductor stocks were hammered in part due to the pathetic action of Marvell Technology (MRVL) which was down approximately 15%. Apparently, traders are upset that MRVL would be diluting earnings by purchasing a division that makes processors for handheld devices from INTC for $600 million. Dilution is one thing but if INTC could not make it work, why should we believe that MRVL has the Midas touch. Regardless, a 15% haircut seems rather extreme. Traders need to remember that all news good or bad will be acted upon in an exaggerated manner in this unforgiving market.

The horrendous action in the SOX exacerbated the decline in the NASDAQ spilling over to all major indexes. Contrarians may take some comfort in the fact that a 'sell the news' reaction to the Fed is a little less likely due to today's poor performance. Some of the blame of today's dismal market action can be pinned on Fund Managers jettisoning positions in order to make end of quarter statements look more attractive to their client base. However you toss it, nobody's going home happy today as has been the case for several weeks.

If You Held a Taser to Our Head:
The NASDAQ is within 2% of retesting the lows recently put in. We believe that 2% represents most of the downside for the time being due to the still oversold condition of the market. We reiterate our belief that regardless of what the Fed has in store on Thursday, the market is likely to find a relief bounce that will be longer lasting than the recent one day wonders we have witnessed. Until we actually hear from the Fed, expect all dips to be bought and all rallies to be sold probably in an alternating day fashion. For extremely nimble range traders this is paradise, for all the rest this is Hell.

Our next post will be sometime on Thursday.

___________________________________________________
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