First they rotated into the cyclical stocks, and took those hapless equities into a brief moment in cyberspace. Then they started taking up the foods and the beverages. Perhaps, after Thursday's 30-year auction, they will take up the banks if the bonds behave.
Unfortunately, it looks like the amount of money coming into the market has slowed. That means each rotation involves selling something that you own already. Perhaps, some of the people who sold the cyclicals are now rotating into the soft goods stuff. But there won't be enough money to keep these stocks moving just from the cyclicals; the fodder just isn't large enough to do the job.
So people will have to sell the loose conglomeration of stocks known as tech. They will sell a little Net, some semi and some personal computer to play in these new unexploited stocks.
That's the kind of action I am seeing. Notice, it is not out of tech into cash. There are groups that perform well everyday. The tech money is headed toward these more cozy situations.
Should you play? I am nimble and have no religion. I have cash. So, sure I will play. In fact, I am already anticipating playing for a few days and then returning to tech in time to see if
can turn the group around with some good news. (I am long both -- one because I believe it is doing very well and the other because I think the worst is over. Take a guess which one is which.)
But for the vast majority of you, these rotations are going to be a lesson in futility. Take the foods. There is a big food conference next week. Given that I think the bonds are done going down (up in yield) and that many of the food stocks are at low valuations, I figure they are good for a trade. I will have people covering this food conference and I will be able to move very fast. I know that once the food conference is over, the trade might be over. (If you want to see one of the ideas people are playing for this conference, take a look at Dan Colarusso's excellent
article about Heinz calls. I am not playing Heinz right now but I know many people are and, judging by these call buyers, they think something dramatic will happen.)
It's not worth playing for anyone but the most nimble.
But many of you like to trade. Many of you want to know what guys like me think about trading, how we view these short-term moves, and for you, this stuff could be instructive.
What would I do if I had a nice portfolio of tech names and felt great about them and was not worried about near-term volatility or the trimming of valuations? I would do nothing.
Sometimes that's the best course.
During Wednesday's "Power Lunch," Bill Griffeth interviewed a fellow from a
which runs a
fund. The fellow spoke about how the Nasdaq 100 is very liquid and that if his fund were in to sell these stocks, as David Faber mentioned on-air during "Squawk," he wouldn't have any impact.
I respectfully disagree. As someone who has traded the Nasdaq 100 for years, I can tell you that this index can be moved with very little capital. If you come in with some size at the last half-hour and you pound it, you can destroy these stocks. Maybe Rydex had nothing to do with Tuesday's sell-off at the last half hour, and all of us who heard the rumors were just plain wrong. But it is naive to talk about the Nasdaq 100 as if it were the
. The index is incredibly susceptible to pushes and pulls, much more than it should be. And certainly more than this guest indicated.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication, the fund was long Dell and Hewlett Packard, but positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending an email to firstname.lastname@example.org.