Kicked In The Teeth Again

With the buyers gone, with the shorts all squeezed out, we see what happens when the market is left to ponder nothing but the oil spill, weak job growth and a housing market that's lousy and going to be lousy for some time. The shock of any of these, though, is that they are shocking.

We are so locked in this range of Dow 9700 to 10,700, and when we get near the top, we just get clobbered. And we get clobbered in sickening fashion. That's because one thing is becoming awfully clear to all participants: When the market is down going into the homestretch, it will be pummeled beyond recognition sometime within the last half hour, and stocks that are down 1 point go down 2, and stocks that are down 2 points go down 3. If there is a thesis attached and you get bad macro news -- say today's housing numbers -- all housing plays will fall viciously with no bottom.

It is as if 500,000 more homes that weren't sold mattered, even as I don't know a soul who actually believes in these silly housing estimates. I am not an economist, but I have my own estimates, and the existing-housing sales came in above what I thought we would get post-tax credit, and the price of housing went up even though everyone says there is going to be a double dip. It should be going down, not up. The inventory of homes fell. Housing is actually in line to slightly better, given no unemployment growth. No matter, there are no bids today for anything housing-related. These stocks were crushed beyond all recognition.

The trajectory of all sorts of stocks can be shocking. Oil ran up $7, and the oil stocks crept up over many days. Oil loses 61 cents, and the stocks give up a third of their gains. In an afternoon. I can give you a half-dozen sectors that acted the same way.

We are in an untrustworthy market, one that was up -- ridiculously so if you ask me -- at the opening for no reason I could fathom. That turn in the futures to higher levels was one of the great fake-outs of the year. Without the persistent bid, I figure we could give up about half of what we just made even if nothing happens, because other than China, nothing happened. We solved the systemic risk, but we sure didn't resolve the earnings risk.

We are about to hear from some tech companies that do not yet see good news out of China and have seen bad news out of Europe. The market is not ready for that. We have the stocks that are the highest growth taking it on the chin the most, even more than the housing plays. We have the makings of a rollover that could take us back another 2%-3% before it's over and the marking up begins.

To me the best strategy remains picking at the winners - CMG, AAPL, NFLX, DECK, ISRG, ESRX and CRM - use the October deep-in-the-money calls to ensure you catch the bounce but limit the downside if something systemic actually does develop that I know I don't see. And otherwise expect a pasting, because the buyers have vanished and aren't coming back without new information or without some stocks they want to take back up to make their quarters.

long AAPL