Monday, August 4, 2008


Don't Be Fooled By Today's Action

What a mess of a market today. We have some pockets of absolute carnage in oil, gas, steel and various commodity-related and cyclical industries, but the DJIA managed only minor losses. With oil down, we had a few brave folks willing to buy retailers, and there was some money looking for safety in pharmaceuticals, but the selling elsewhere looked like something you expect to see only with the DJIA down 300-400 points or more.

My major complaint about the market for a while now has been that there is no upside leadership. Yes, we have a few medical and biotechnology stocks doing well and some "defensive" type plays showing relative strength, but otherwise there is absolutely nothing out there showing signs that it can lead us onward and upward. A few of the perma-bulls are hoping that maybe financials would keep on going after a huge oversold bounce, but that seems quite questionable, if not downright naive, given the growing view that there are many more shoes to drop in the sector.

It was a much worse day out there today than indicated by the major market indices. Many major stocks in the oil and commodity-related sectors had absolutely no support and were down 10% or more. There were some pockets of real fear out there and, unfortunately, that has a tendency to spread rather than drive buyers to buy other sectors.

It's a mess out there right now, and there is no reason to believe that it is going to quickly improve. Stay defensive and be patient. Better days will come, but it's going to take some time.

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