Wednesday, October 12, 2005

Where's the relief?

Another day of early gains that get completely erased by the close. Volume levels rose on both exchanges, signifying yet another day of distribution. Breadth was terrible, and the Hi/Lo index (NYSE) made a new low for the year, with over 300 net new lows. That's a lot of weakness.

Sentiment indicators, including the VXO, put/call, etc., were all higher today. So bearish sentiment is nearing extremes. But we need to change this pattern of weak closes. I don't know what will cause this, maybe some strong earnings reports, but if we can get a good upside reversal day I think the market could enjoy a fast run on the heels of a short squeeze.

Oddly, the SMH finished up a little today. So did the DRG index. Brokers and bank stocks were hit the hardest. Yield plays, from utilities to REITs to energy trusts, have also been sold relentlessly this month. Not a lot of places to hide. If you're an individual investor, I would be happy to just sit in cash right now.


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