When you see divergence be alert

What did I see today:

1 Early morning the bears were ecstatic. The major bears on housing were patting themselves on the back. Champagne time. BZH and HOV earning call was being touted as 100% confirmation of the bearish hypothesis.Everyone was supposed to be selling their house. Run, run , run, the sky is falling. Slam dunk trade on housing short.
What happened. Do I need to say anything.

2 The sector picture today tells you a very interesting story if you keep your eyes open. What is down majorly Gold and Silver. They are supposed to rally during bear market. What is up besides homebuilders. Technology, select retails and transport.That should give you a hint of surprise in store for many people. It also tell you lot of people were caught today on the wrong side of the trade. Below the surface there is a divergence.

3 Below the surface there are good breakouts on number of stocks. Some of them are breaking out from long bases. I don't know who are these fools buying when the sky is falling. ( I am one of them).

These are just my observations. Do not trade based on any of what I say or do. Everyone has different risk profile plus if you follow this site you will be amongst a tiny minority. Only about 20-30 readers read this site regularly rest come here looking for Paris Hilton P***y or Anna Kournikova boobs after searching for it on Google. It may not be a bad idea to keep an eye on Google (GOOG) tommorrow.

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2 comments:

Kaiser Soze said...: Pradeep,

I like your contrarian perspective and am a regular. Keep it coming.

Speaking of divergence, have you noticed that the financials & techs seem inversely correlated the last several weeks. Regional banks were really weak thursday.

-kaiser; Sep 8, 2006, 2:23:00 AM
Pradeep Bonde said...: Thanks. Yes I saw that. May be a subtle cue of sector rotation.; Sep 8, 2006, 6:46:00 AM

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