Tuesday, April 11, 2006

More Distribution

Stocks took a hit today on the geopolitical fears stemming from Iran and its nuclear activities, as well as a continued rise in oil prices.

On Friday, I highlighted the negative LROD in the markets. After a pause day yesterday, the markets continued lower today with the SPX breaking below its 50-day average. Volume rose on both exchanges, making it a distribution day, the third in about three weeks.

Bearish sentiment also ticked higher today, with the CBOE put/call ratio hitting 1.0, and the volatility index (VXO) jumping +8% to 12.6.

Every sector that I follow finished negative today, with semis and biotechs down the most.

I put out some of those shorts I listed yesterday, just to add some downside protection to my portfolio. I am not looking for something more than a garden variety correction, but still want to be proactive in my approach. I will look to increase my long exposure when the market reaches oversold levels and bearish sentiment rises again.


At 2:54 PM, Blogger Grant said...

Nice call on those shorts. Tomorrow will be interesting to see if the down side slide flattens out or just keeps going.

Markets took a sizable hit again today, and I wonder how long they can continue to slide. The Iran situation doesn't help, but when oil retraced its huge run from this morning, the markets didn't react accordingly.

Could this be earning season profit taking?


At 3:10 PM, Blogger J. Kahn said...

It could be jitters ahead of earnings season, but I think indiv. stocks will react to earnings according to the outlooks given on the conf. calls.

Also, I think there will be some rallies to make it look like the correction is over, but those will likely be headfakes. I'm staying patient.

At 4:56 PM, Blogger Grant said...

So it sounds like you might be thinking we're in for a bear rally?


At 8:10 AM, Blogger J. Kahn said...

I don't know if I would classify it as a bear rally. I just think there will be a couple of misdirection days during the correction to keep the bears on their toes.


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