Wednesday, January 13, 2010

Second Day in a Row with a Lot of Damage Under the Surface

"The market" is a very broad term, and generally useless unless all stocks are moving in lockstep - your view of the market depends on where you sit and what you own.  For many weeks in latter 2009 for example, the indexes and large cap, multinational stocks were holding up but there was little participation among small caps.  Then as the holiday season showed up, the typical speculation among small caps by the retail crowd took over (as it does almost every year) and the Russell 2000 (chock full of smaller companies) actually dominated the action.  This continued last week, the first week of 2010, as speculative fervor hit a fever pitch - especially in the Chinese names.  Yesterday and today we are seeing the reversal of that trend and the broad indexes are hiding some pretty serious damage to a lot of names the past 2 sessions.  A bevy of stocks on my watch lists are down 10-15%+ in the past 2 days, which if you just look at "the market" you'd never notice.

In our Ritalin addicted, :"Fast Money" nation people like to make sweeping calls about "rotations" and such; a week ago at this time a "rotation" into financials was happening.  This week you've seen those same names hammered.   2 days marks a sector rotation only if you are a talking head pundit on financial infotainment TeeVee.

Hence, let us observe this recent change in behavior in small caps - especially Chinese - but not get on the horn calling for a "rotation" or "change in direction" in the market - especially this market which has no rhyme, reason, nor memory from day to day.  This could be the start of a move away from these names - or it will all be forgotten by Friday.  It will only be obvious in retrospect.

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