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MV Hunting Report: Time to Cash Out, Keep Powder Dry


Rain or shine, we review the day's biggest stock stories.

Sometimes, there's no explanation.

For 3 days this week, the market did absolutely nothing. It sold off on bad news, then would rally back to where it had been -- a sign of strength.

Today, the market gapped higher by over 1% at the open, on literally no news at all. The most likely scenario is that shorts finally gave up and covered, causing a squeeze. The squeeze led to reckless buying at the open; calmer heads prevailed midday.

Professor James Kostohryz gave his thoughts on this morning's action on today's Buzz and Banter:

"The refusal of the market to correct substantially off bad news from Monday-Wednesday and yesterday's late day rally towards the unchanged level was impressive and clearly foreshadowed the fact that this rally was not done. I reduced the net short position yesterday at the close and the opening above S&P 980 prompted me to get out of all of the net short position. I will test the short side again between 1000-1010. I really do not see anything specific that is going to stop this market. However, as can be seen with the initial jobless claims numbers today which were higher than expected, there is nothing fundamental that is driving the market up."

It was an across-the-board rally for stocks, with strength from Baidu (BIDU), Google (GOOG), Apple (AAPL), Cliffs Natural (CLF), and Mastercard (MA). Notable laggards were Intel (INTC), Kellog (K), Boeing (BA), and Yahoo (YHOO).

The S&P 500 closed the day higher by 1.19%, to 986, closing 10 points off the high of 996. Just looking at the numbers, today would seem like a constructive up day -- but today's close wasn't pretty. Just as we saw panic-buying this morning, once 3:30 hit, we saw a panicked profit-taking. This should be seen as normal, since the market is up 120 points over the last 3 weeks.

How should you play this? Professor Jeff Cooper gave his thoughts.

"As I just told one of my consulting clients who is a very large player and has been long from March and leveraged long from early July:

"'I could always be wrong, but I would sell my investment positions between here and the weekend. The market could go higher, but in my opinion the upside is peanuts, and risk is the elephant in the room.'"

"The S&P has entered the window of time and the window of price that was projected and looks great.

"Of course, that's just the point -- often when a projection is reached, it's hard to find a chink in the armor.

"I have not suggested my client go short yet. Moreover, I have no idea what a catalyst might be to cause a decline (sometimes it's just profit taking that causes a market to roll over of its own weight)."

Tomorrow the market will have a catalyst to sell off (or test the high's) when the GDP (-1.5% cons.) and Core PCE (-2.4%) are announced at 8:30.

Have a great night!
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No positions in stocks mentioned.

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