Around the Reef- Afternoon Comments

I am sure I’m not the only one that is happy that this week is over. It was tough going with a lot of volatility in the small cap longs which were tossed around by concerns about Hurricane Rita. Another downgrade of Rita today, brought support yet again to the market and it looks as if market participants now believe all the negativity is priced in.

I had speculated that major negativity this week may set us up for a relief bounce next week. That thesis was clearly adopted by many others who were trying to get in front of the move and did there buying and short covering on Thursday and Friday instead of next week.  Now, such a tradable bounce isn’t nearly as clear. Monday will be a very interesting day as we await the outcome of Rita. I suspect that oil stocks will bounce back next week like they did following hurricane Katrina, but we shall see.

I’m heartened to see that for the first time in several weeks there are breakouts that are following through. For example stocks like KONG and WSSI saw accumulation on Thursday and follow through today. Breakouts that we attempted to bring to your attention like FWLT and past alert VIVO showed good signs of life today. While this action does not make us throw caution to the wind, it does start to make me feel a bit more encouraged. Typically, it is stocks like these we want to see lead the market higher. This may be an indication of good things to come but we have some tricky action in front of us next week.

I am taking home many longs this weekend, and the Sharkfolio is heavily invested. I am encouraged by what I am starting to see and will let the stocks tell me differently.

Rest up this weekend, it should be a very exciting week ahead.

RevShark

LONG KONG, VIVO, WSSI, FWLT