In the Doldrums

SAN FRANCISCO -- Blue-chip stocks tumbled Wednesday while strength in semiconductor stocks and select big-caps such as BEA Systems (BEAS Quote - Cramer on BEAS - Stock Picks) and eBay (EBAY Quote - Cramer on EBAY - Stock Picks) helped the Nasdaq Composite post the smallest of gains.

Sounds like a veritable repeat of Tuesday's action, doesn't it? It was, except the Dow Jones Industrial Average was able to pare its losses in the final hour, rather than extend them. While that's certainly a notable difference and good news for those long, the session was pretty mind-numbingly dull otherwise.

A few more soporific days like this and I'll be forced to head to Europe for an extended trip. Oh wait, I'm doing that already, beginning Friday. Elsewhere, a veritable epidemic of vacations has those forced to stay behind and man (or woman) the trading terminals lamenting their fate.

"I just feel like we are in the summer doldrums," said Ned Collins, executive vice president of U.S. stocks at Daiwa Securities America. "I just don't see any catalyst to shake us out of this trading range, which we have not been able to get out of no matter what the news is."

Collins rattled off a litany of reasons why many investors feel compelled to do as little as possible. They included the end of earnings season -- individual stories such as BEA Systems, Analog Devices (ADI Quote - Cramer on ADI - Stock Picks) and Hewlett-Packard (HWP Quote - Cramer on HWP - Stock Picks) notwithstanding -- the near unanimous assumption the Federal Reserve is on hold, and the aforementioned rash of employee absences.

In regard to the trading ranges in which major proxies seem quagmired (everybody else is verbifying, why can't I?), Collins was noncommittal regarding whether it represents a precursor to big gains, as bulls argue, or another big decline, as the other camp contends.

On the plus side, the trader noted the broad trend this year is following a similar pattern as in 1998 and 1999, when market averages were essentially flat from April to October and then spiked higher in the fourth quarter and first quarter of the following year.

"We haven't given up the ghost," he said. "I think the market is OK."

Conversely, Collins expressed concern that even though mutual fund inflows remain robust, "The market can't get out of its own way." To him, that suggests fund managers are engaging in distribution -- a slow, steady sale of stock -- rather than accumulation.

"There's still a lot of money out there, but it's scared money," the trader said.

One scenario I didn't discuss with Collins, and which gets almost no air time, is the possibility major averages will continue to meander in their relative wide ranges through the end of the year, and perhaps beyond. No big moves in either direction, that is.

Or is it heresy to suggest such an unsatisfying outcome?

Catching Up With the Joneses

One nice side effect of the relative quiet on Wall Street is that it provides an opportunity to reconnect with sources who have made interesting, provocative or noteworthy calls.

For example, on Aug. 9, Peter Green, technical strategist at Gerard Klauer Mattison, predicted a close below 64 1/2 for Cisco (CSCO Quote - Cramer on CSCO - Stock Picks) would bode ill for the stock, and the Nasdaq, too.

Cisco closed below that level the next day and has remained there ever since, except for Monday, when it closed right at 64 1/2. On Wednesday, the networking-equipment colossus rose a scant 0.2% to 63 1/16.

But when I caught up with Green late Tuesday, he backed away from the dire prediction.

"I think things are a little more positive," he said, noting put buying has increased -- albeit modestly -- in recent days, a sign investors are become less complacent (although many others argue differently). Additionally, "Until the bond market turns decidedly negative, you can't be too negative."

He conceded bond prices were due for some retreat after a big rally heading into this week.

Bond prices fell Wednesday as the Consumer Price Index was a smidgen stronger than expected, and oil prices resumed their upward flight. Still, it's way too soon to say bonds have turned decidedly negative.

Finally, the technician observed most investors still want to know what to buy, rather than be concerned about when to sell. "There's too much money out there," Green said. "You can't be too negative."

Too much negativity seems to have snagged Richard Williams, market technician at Jefferies, at least as it pertains to the Philadelphia Stock Exchange Oil Service Index.

Back on July 27, Williams recommended shorting the index, eyeing resistance at around 115 and a downside target of 92. Since that date, the OSX has, of course, leapt higher in conjunction with crude prices. After rising 3.3% Wednesday to 133.24, the index is now up 16.3% since July 27.

"The original call was dead wrong," Williams conceded. But it should be noted he also recommended a 120 stop on that short (as originally reported), meaning the technician lost 4.3% on a bet he felt had the opportunity to produce gains of 20%.

Most traders relish that kind of risk/reward scenario because "one winner makes up for three or four losers," Williams said.

Speaking of turning losers into winners, Williams said the Oil Service Index's close above 127, which it has done for three days running, suggests the index has a realistic shot to hit 150.

"Essentially now I'd be trying to pick it up cheaply," he said, suggesting buying at 130 with a 150 target and a stop at 125. That is, with 15.4% upside potential and 3.8% downside risk.

The lessons here being that a) stops are your friend and b) you can turn losers into potential winners if you're not emotionally attached to a given trade.

Wow, and I'm not even that big a fan of swimming.