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Retest May or May Not Spell Doom for Bulls

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Reasons for caution and optimism.

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Greetings from IT hell Minyans, where for the last three days and counting I have been Satan's personal whipping boy. The Commodore 64 might bring back the warm and fuzzies to geeks the world around, but trying to trade with something very similar to that is not nearly as nostalgic, especially when it decides to eat a post just when I am about to push the "Send" button. Whining aside:

  • So far today I have spent an inordinate amount of time at what seems to be the latest market pastime , i.e. trying to determine whether we are in the midst of the famous "retest", or whether the market elevator is about to plunge a few more floors. And the answer is... I am leaning toward the "retest" scenario, followed by a sizable ramp, only to end with Hoofy getting his heart and assorted other innards ripped out of him, sans anesthesia.

  • With that pleasant visual in front of you, I am thinking hard about pocketing some of the hefty volatility in my stash of Index puts, and replacing it with "inverse leveraged ETF's". Nothing done yet, but it's on my radar.

  • Yesterday at 4:00 p.m. I was hiding under my desk waiting for my recklessly large Akamai (AKAM) long position to blow up in my face. Fortunately it was not to be. Pretty much the first thing out management's mouth was to highlight its relationship with Apple (AAPL) for the delivery of its new movie service. That would be the same movie service that AKAM supposedly had lost to competitors a few weeks back, and that cost the stock more than $5 in no time. Nor was there any inkling that AKAM's business is slowing down, as the number of bits shooting around the internet is growing much faster than our economy is shrinking. Two data points that jumped out: (i) based on 1Q guidance, it sounds to me like AKAM is sandbagging full year guidance; and (ii) Average Revenues Per User are growing at mind-bending speed. I am as bearish on equities as they come, but taking the dark side of AKAM seems like a very steep hill to climb.

  • In early January there was TV chatter that Goldman Sach's (GS) December business had ended horribly, and January had started off worse. Since then GS has been lagging its brethren. Can the market withstand a whiff from the company can do no wrong? Is that type of news what will put in a cyclical bottom within the secular bear market?

  • If anyone is looking for a 25%+ grower, with a near monopoly position, trading at a PEG less than 1... the CME Group (CME) with a 4 handle looks like it fits the bill.

  • Can the Mexican economy withstand a U.S. recession and falling oil prices? Dunno, but these are definitely lower highs and lower lows.

  • Digital content... digital content... digital content... Adobe (ADBE)? An intriguing falling knife.
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Position in AKAM
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