The lack of a bounce so far in technology stocks is not a good sign, but it is still early. If we don't see some buying interest late in the day, that is going to send the dip-buyers to the sidelines.
One of the things that made the rally off the July lows difficult for many traders was the lack of meaningful dips along the way. We had some basing and pullbacks in December, but prior to that and in early January, we were unrelenting to the upside.
Straight-up markets are great for the more passive investor. They just sit there, stay long and make money. For active traders, they are less appealing because straight-up markets don't offer good entry points or the opportunity to play the volatility of ups and downs.
Action like we are seeing today tends to suggest that we are going to be heading into a market with greater volatility. When a group like technology is slammed this hard, the wisdom of throwing money at anything in a rising trend diminishes. Selective stock-picking becomes more important, and the ability to change directions quickly is also rewarded more in a choppy environment.
We'll see how things go from here, but with positive seasonality ending and the likelihood of some good and bad earnings reports in the next two weeks, I believe we are going to see more big spikes in both directions. I have to admit that I'm biased because that is a more favorable trading environment for me. I do better in a month like this past December when we had pretty flat action overall vs. a month like November when we went straight up.
P.S. Will you be there when Cramer makes his next move?
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Rev Shark Blog Chips Take It on Chin 1/18/2007 11:25 AM EST The concern is whether tech weakness will bleed into other sectors.
Rev Shark Blog Freefall, Here We Come 1/18/2007 10:11 AM EST The market gets hit ahead of Bernanke's comments.
Rev Shark Blog Apple Raises a Red Flag 1/18/2007 8:38 AM EST If it can't rally on great news, which tech stocks can?
James "Rev Shark" DePorre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. 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 to send him an email.
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