Looking for Clues

Author:
Publish date:

Looking for strength in all the wrong places? That's what I feel like I am doing. My partner,

Jeff Berkowitz

, comes to me with a crafty thesis to buy the drugs, betting that the buyers of drugs -- the

McKessons

(MCK) - Get Report

and

AmeriSources

(AAS)

-- were weakened by the

Federal Trade Commission

.

We are on the

Compaq

(CPQ)

call and we like everything we hear -- but then again, we are long, so maybe we are hearing what we want. The action in retail is terrific -- but maybe we need retail to be weaker?

It's that hope-springs-eternal thing again. When everything opens hideously and then

does not go down

, we try to figure out whether it is random buying, futures buying or actual buying.

Is

Coke

(KO) - Get Report

telling the truth? Or is

Bristol-Myers

(BMY) - Get Report

telling the truth? Is

Fannie Mae

(FNM)

right or is

Freddie Mac

(FRE)

right?

Why do I care about this stuff? Again, because this game is all about clues, taking them, finding them, exploiting them. We don't want to be fooled by strong futures buying into thinking that the bottom has been reached. But we also don't want to miss a bottom that may be caused by the massive gloom that envelops all who trade for a living.

One thing that does not lie is the advance-decline line. And as long as that hangs out in this dubious almost-2-to-1 negative mode, all the positive clues are simple head fakes, designed to pull you in at a crummy level and cut your heart out later on.

For us, Compaq is the ultimate "tell," meaning the stock that will forecast today's action. It is the one that is speaking positively as I write this. It is the one that is most relevant for today's action.

Tomorrow? Whole different set of clues, whole new set of parameters. And maybe a pattern or two that lasts more than a day.

James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com.

At the time of publication the fund was long Bristol-Myers Squibb, Compaq and Fannie Mae, though 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 a letter to TheStreet.com at

letters@thestreet.com.