Securities Research Services

Thursday, April 12, 2007

Feeling Lucky?

We hope no one is superstitious, because yesterday was the unlucky day; if you were heavily short that is.

What can be learned about yesterday’s market strength?

1. That calling a top in a bull market is foolhardy. 2. It doesn’t pay to follow the crowd when the trend isn’t strong.

When the majority of the analysts are looking for a pullback and when the put:call ratio is overly bearish (2:1 puts to calls is overly bearish), then the market is going to do some damage to the crowd’s trading accounts.

This is what occurred yesterday.

What does yesterday’s rally show us about the future direction of the market? Probably nothing. From here the market is going to be driven by earnings season. It’s still way too early to know how the market is going to embrace this quarters round of earnings. As such, we don’t have a bias right now. We will take the trades as they come, but will not be aggressive again until a clear trend resumes.


wez said...

dear srs, you said it was great that sil reached its target in 3 days. but you know i just can't imagine that the stock could do the same thing again without the strong support of the major indizes. do you still remember dtc's home run without whole market rally? or uis's position holding even the market ran against it? they were indeed great stocks. regard.

SRSFinance said...

Hello Wez, we absolutely agree. This is why we are taking only very conservative positions in the current market. Likewise, it is why we are setting expectations for weeks and not days until targets are reached.

There are times when the market provides plenty of good, fast moving set ups, then there are times when you have to look for stocks that are the anomolies, such as SKM.

wez said...

i would short the dow today for 12575 with 12500 as target. regard.