Tuesday, December 8, 2009

Kind Of A Messy Rotation

It was a messy and unpleasant day of trading. Although the point losses in the major indices weren't too severe, we had broad weakness on slightly higher volume. No major sector was in the green, and the weak-dollar plays -- gold, oil, steel, coal, shipping -- were hit particularly hard.

The stronger dollar was the primary problem today, but what made it difficult was that the rotation into new sectors wasn't very vigorous. Some of the big-cap tech names -- GOOG, AAPL, AMZN, etc. -- benefited some, but at the end of the day, the gains there were limited.

If the stronger dollar and the rotation persist, then the likelihood is that we have seen the highs of the year unless the rotation into new names really takes hold and a few of the big-cap technology names really catch on fire. The big problem is that it is awfully tough to trust in a sustained rally of the dollar. The issues that have weighed on the dollar for so long are still out there and will pop up again. There is probably a bit of squeeze in the dollar right now, but it is obviously the key driving force in this market and must be watched very carefully.

The good news is that out of chaos, we usually see some better opportunities. We just need to stay attentive and wait for a little more clarity....

long AAPL

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