What Started Out So Good, Turned Bad

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In the trenches of capitalism it's getting mighty nasty. What would have been the effect, for instance, if a large commodity house had not bought S&P futures in the last 15 minutes of Tuesday's trading? What would have been the impact if that commodity house had decided to sell and not buy, moving the market down 50 instead of up 50? What would have been the impact of a down-50 day that was once up one hundred? Chaos, I think.

That's the specter we were left with after Tuesday's bizarre trading. Can you imagine the field day that technicians would have had if we had not "held," whatever that means in this tape?

What I am leading up to is that whatever we saw Tuesday, it was not a high-quality day for the bulls. In fact, it resembled the same kind of ragged up days we have been seeing time and again. We start out with a great advance-decline line, we get a little better in midmorning, and then, as if by magic, we begin to see the rolling over action that bites us every day. At the end of the day the advance-decline line is negative and some great stocks have been shot down without an epitaph.

I know I saw it in

Gillette

(G) - Get Report

. I came in short Gillette last week, with the September 45 puts. (As opposed to actually being short the common stock.) I covered by buying Gillette in the the down 200 morass from Friday, at about 46. (In other words, I did not sell the put outright.) I noticed when the market was up 100 this morning that Gillette was hardly budging. One of my rules is that when a stock doesn't fly up in a robust morning tape, when others in its cohort are screaming, something may be wrong that I don't know about. So I booted the Gillette up a quarter of a point. That left me with a nice gain on my common stock and gave my put a new lease on life. (In other words, I got short again. See my pieces about how to use puts effectively from

last week including my Saturday rewrite from the

week before.)

Boom, next thing I know, there are sellers scrambling to get at Gillette from every angle. Two firms are shorting it. Guys buying puts on it. Guys selling it long. In a flash, the stock is down a buck and a half. In an up tape!!! What happened? Did

Mach 3

sales stall? Did someone stop using

Duracell

batteries? Who knows? Maybe NOTHING HAPPENED AT ALL.

Gillette is a microcosm of what is going on underneath the Dow stocks. With no news and no apparent reason, the world is suddenly trying to get rid of a stock with a new product cycle that every analyst says is doing just fine, thank you.

Bristol-Myers

(BMY) - Get Report

, which I am long, is no different. The drug stocks were pumping all morning, and the group was as hot as a pistol. Next thing you know, I turn my back on Bristol-Myers and it is down a buck and a half. Why? I hit wires, I check around. Nada. No reason. Sloppy seller.

Unless we see the advance-decline line stay strong for a couple of sessions, and we don't see these non-news swings in major stocks, it will be very difficult to rival cash for performance. Which is why I raised a bucket of it when the market was higher, and why I was very slow to redeploy it when the market was lower. Somehow, I figure, the sell programs will coalesce to let me in at lower prices some time in the future. That's about the only bankable thing I know about this market.

Or, to wax metaphoric: Sometimes you can see and feel the train about to leave the station, and you have to get on board. Other times, you see it about to pull out and you know it will be back again, real soon. The latter sums this market up perfectly. Which puts me squarely in the camp that says the morning rally we saw was too derivative oriented, not stock-buying oriented, and therefore another opportunity to sell, not buy.

Random musings

: Those wild and crazy S&P people really fooled the index-guessers this time. The

DSC Communications

(DIGI)

deal isn't even closed and bam, it's out of the index, and

Regions Financial

(RGBK)

comes in. Boy what they won't do to add

America Online

(AOL)

!!!

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

At the time of publication, he was long AOL and Bristol-Myers Squibb, and short Gillette, though positions may 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.