Afternoon Market Summary*
02/07/06
The market dished our more pain
today and while we have been expecting the slide, writing about the coming
weakness and raising cash, it is never easy to watch your favorite stocks
beaten lifeless. Breadth was very poor, volume picked up and discouragement
definitely wafted through the air.
We were encouraged to see gold and oil weak on the day, and remain confident
that the selling we are seeing isn’t the start of a mass exodus but rather,
the pullback we have been looking for in order to bring prices back to
reasonable levels and set up for prudent entries.
While it is frustrating to see the portfolio drift lower on a day like
today, we didn’t do much of anything. We feel comfortable with our cash and
hedges, and continue to update our list of potential buys. The market is
getting closer to a tradable bounce but it isn’t here yet. When we see the
turn it will be very important to be prepared rather than attempting to
scramble putting capital to work.
One scenario that we think is likely is a rotation from recent leaders such
as steel, metals and gold and into a crop of new leaders, maybe even some of
the big cap stocks which have been acting so poorly lately. For that reason
we are very skeptical about bottom fishing some of the pullbacks in recent
leaders at this point.
On tap tonight is Cisco, which if the company follows the lead of other
large cap techs may be a depressing report or maybe what’s needed to breath
some life back into the bulls. Either way we aren’t betting ahead of the
report on any stocks that may see sympathy action, but rather will take the
appropriate action once we are certain of a direction. For now we continue
to drift along with capital preservation as the focus.
Have a good evening.
RevShark