Looking for Downside

We bounced momentarily on a slightly better-than-expected consumer confidence number but we are off to a very poor start this morning. Breadth is about the inverse of yesterday's strong levels, and most groups are in the red. Retail and chips are showing some relative strength, but the dollar is up a bit and that is hurting energy, gold and commodities.

The biggest negative to me is that Asian stocks were very weak following a warning by the central bank of China that lending standards need to be tightened. Shanghai took its biggest hit in three months on the news, and that is obviously hurting sentiment for China stocks traded in the U.S. This has been the best momentum group in the market for a while, and I was hoping that theme would give us some good Thanksgiving trading but that doesn't look to be the case now.

As I mentioned, I sold down my long positions into strength yesterday and I've done more selling today. I've added a few shorts like Jefferies Group (JEF - commentary - Trade Now) and Legg Mason (LM - commentary - Trade Now) and will be looking for more opportunities on the dark side.

A lot of folks have been looking for positive seasonality to help out, and if it doesn't develop they will be scrambling to reposition. I think we are seeing that happen now and I'm working to stay a step ahead of the crowd.

Short JEF, LM

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James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.