Tuesday, February 06, 2007

Boring!! Getting Sleepy!!! But Excited!!!

This market should be bottled and sold as sleep medication. This type of action is more indicative of a rally coming then sell off. Markets have several ways of bottoming, and boring action for sometime, serves to, you guessed, bore out the remaining weak players. Just as capitulating action serves to scare the last weak hands out, as we saw two weeks ago. The bears needed to throw everything including the kitchen sink at the market to get it to sell off, and the market took no more then another day to shake it off. Typically bad news trickles in at a slow pace, driving the market lower, before being dumped on us in the worst case scenario forcing all to sell (capitulation). But we managed to get that action in one day rather then a few months. This strange action is indicating that the continuation of the bull is near.

CSCO reported a fantastic quarter even after being downgraded heavily by four analyst recently, and should light a fire under the markets a**. If they fail to provide the spark, then the CPI and PPI numbers next week should do it. They started the rally back in August, and should show inflation is cooling as gas and oil prices fell in January.

But I do have a feeling that the market wants to wait to options expiration next week, to keep all those CALLS out of the money.

If you're long, lose the laggards, and keep an eye on the winners. Look for secondary add points in those stocks, so if the rally does resume, you can get your capital back to work. There are still some quality names setting up in bases and worth considering. So do your homework and find them.
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