Tuesday, April 10, 2007

Midday Check

With the Nasdaq up for 8 of the last 9 trading sessions, many are wondering if we will see a pullback? The answer is that we will most likely see some sort of pullback, but with so many investors trying to position for it ahead of time, it could prove short-lived.

Looking at the sentiment indicators midday, here is what I see:
  • The CBOE put/call is elevated at 1.13
  • The ISEE is depressed at 99
  • The ARMS Index is above-average at 1.24

So it seems that traders are already bracing for a correction, just like they have done time and time again. I have taken some money off the table, but I am not looking to get aggressive or put on a bunch of short positions.

Earnings season often brings with it increased volatility. I plan to have a little cash on the sidelines to take advantage of those overreactions we often see that happen to good companies' stocks, which often quicly recover once the dust settles.


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