Wednesday, May 06, 2009

Reversal for NDX, Another Pause Warning

Top Line: The stock market moved up but grudgingly so. The NASDAQ Comp barely eked out a gain at all while the NDX (NASDAQ 100) was flat as a pancake, up four cents. The pause may be here.

The market participants are getting braver. They see the stress tests and are not bothered by the possible results. They see the jobs' report coming on Friday and then see the ADP report that job losses were much less than expected so are confidently buying stocks. You know that kind of thing makes us Very nervous. So nervous are we, that we took some profits today in our trading account. No, we didn't touch our long term funds but we may sell some of those if we get even better prices.

With the T-bonds holding their own and the volatility indexes sliding even on selling, we felt if would be best to take some profits. In the last four trading days our trading account was up 35% so we thought it was time to exit some of our positions for a few days. We like selling into strength and will now wait for a good buying opportunity which may not come but if it does will be in a weak market.

As we look out over the next few trading days, the news, as we mentioned above, could give us some strength going into Friday morning. If it does, we may sell some of our long term holdings but, again, it would be a temporary sell. The past two months have given our portfolio a strong lift and we need to be patient with the gains because there should be a lot more to go. Consider that the SP500 is just barely over 900 and we think there is another 300 points Plus to go, about the same percentage move as we have seen already.

We're not saying that you should do anything at all. We just think that we had to sell into this strength with the move we have seen in our trading account over the past few days. The market will do what it wants to do but the indications we have seen in the last few days give us pause.

Looking at the NDX, we saw a big opening this morning with the index jumping 1% at the bell probably heavily due to the ADP jobs report. In about an hour, the NDX was sporting a Loss of 2% so there was a big selloff from the early morning highs. This was the low for the day but with the Dow up on the day, the NDX was giving no good confirmation of the move.

Meanwhile, our commodities stocks were pretty hot all day. Since we still have a job (that sounds like a bad thing in this context) we have trouble trading but on the way into work we did figure that we would need to put some sell order in due to the strong opening. Unfortunately, our stocks kept going up after we sold them but not a lot. Anyway, we are hoping to buy them back at better prices over the next two weeks. Anyway, we have the same stocks in our long term accounts so those accounts got fatter after we sold our trading account assets.

The thought we have is that the jobs' report will present a selling opportunity on Friday morning but next week is options' expiration and should force a bit of a selloff. When stocks are strong going into the week of options, the large players make sure that their positions don't get hurt too badly, if only for a few days until options expire.

We will wait for a good opportunity to buy back in...and hope there is such a thing next week.

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