Ideal set up for a trap
December 21, 2006
Market participants are in holiday mood. As we approach the end of the year, the market is meandering about without much direction.Low volume and lack on interest characterises this action.
The prices are not going much higher. The bullish case has a lot going for it right now in the form of some positive seasonality and strong momentum. The bears have all but given up on the idea that we will see any significant pullback in the next six trading days, they are scared of the squeeze. When the market is in such complacent stage, all it requires to trigger a move in either direction is few programs. An extremely high level of complacency is always dangerous.Be wary of trap.
When everyone is convinced nothing is going to happen till January, chances of something dramatic happening are very high. Anyone who has been around the market for any length of time knows that it can be very, very dangerous when everyone (the bulls and bears) is convinced of the same thing.
You must have a plan in place and be prepared for a possible pull-back. Conditions are ripe for a complacency trap to be sprung on the market.When everyone expects nothing to happen, a programme buy or sell can catch so many off guard.
There has been a steady deterioration in the leadership group. Slowly, one by one stocks which were the first to burst out when this tally started are deteriorating. The stocks making 50% or more move in a month indicator is at 5 stocks level currently after being in 15-20 range for entire duration of rally. Stocks making 100% move or more has deteriorated steadily in last one week. The stock making 25% move in 65 days has started deteriorating rapidly. Number of stocks from high EPS earnings breaking out has deteriorated, many which are breaking out are not moving forward, are stalling or reversing on failed breakout. Some of these and many other things are shadowed by action in few momentum names. Many of those names are highly speculative and are not the one to lead rallies higher.
Top 30 stocks on momentum scan:
ACOR,Acorda Therapeutics Inc (Google Yahoo Earnings BW Chart)
AOB,American Oriental Bioengineering Inc (Google Yahoo Earnings BW Chart)
AXR,Amrep Corp (Google Yahoo Earnings BW Chart)
AZL,Arizona Land Income Corp (Google Yahoo Earnings BW Chart)
BRLC,Syntax-Brillian Corp (Google Yahoo Earnings BW Chart)
CHTR,Charter Communications Inc (Google Yahoo Earnings BW Chart)
CLWT,Euro Tech Holdings Ltd (Google Yahoo Earnings BW Chart)
CRVL,Corvel Corp (Google Yahoo Earnings BW Chart)
ENPT,En Pointe Technologies (Google Yahoo Earnings BW Chart)
FTGX,FiberNet Telecom Group Inc (Google Yahoo Earnings BW Chart)
GIII,G-III Apparel Group Ltd (Google Yahoo Earnings BW Chart)
GOAM,Goamerica Inc (Google Yahoo Earnings BW Chart)
GROW,U.S. Global Invest Inc A (Google Yahoo Earnings BW Chart)
GVP,Gse Systems Inc (Google Yahoo Earnings BW Chart)
HGO,Houston American Energy Corp (Google Yahoo Earnings BW Chart)
HTI,Halozyme Therapeutics Inc (Google Yahoo Earnings BW Chart)
IAAC,Internat Asset Holdg Cp (Google Yahoo Earnings BW Chart)
JST,Jinpan Internat Ltd (Google Yahoo Earnings BW Chart)
MAMA,Mamma.com Inc (Google Yahoo Earnings BW Chart)
ONSM,Onstream Media (Google Yahoo Earnings BW Chart)
PCCC,Pc Connection Inc (Google Yahoo Earnings BW Chart)
PGLA,Progen Industries Ltd (Google Yahoo Earnings BW Chart)
PTT,Vcg Holding Copr (Google Yahoo Earnings BW Chart)
RAND,Rand Capital Cp (Google Yahoo Earnings BW Chart)
SIGA,Siga Pharmaceuticals Inc (Google Yahoo Earnings BW Chart)
SOFO,Sonic Foundry Inc (Google Yahoo Earnings BW Chart)
SQNM,Sequenom Inc (Google Yahoo Earnings BW Chart)
STEC,Simple Technology Inc (Google Yahoo Earnings BW Chart)
TGEN,Targeted Genetics Cp (Google Yahoo Earnings BW Chart)
UAHC,United American Healthcare Cor (Google Yahoo Earnings BW Chart)
What can go higher, yes there are stocks and groups which can go higher. I am keeping an eye on around 100 stocks like that. Expanding the momentum universe to 5% can give you much better read on which are likely to lead in next phase. The top 2% are slowly deteriorating one by one but they will be replaced in relative ranking by others. It does not take much to get fully invested on long side, if the market does start rallying. But I have serious doubt about it at this stage.
The prices are not going much higher. The bullish case has a lot going for it right now in the form of some positive seasonality and strong momentum. The bears have all but given up on the idea that we will see any significant pullback in the next six trading days, they are scared of the squeeze. When the market is in such complacent stage, all it requires to trigger a move in either direction is few programs. An extremely high level of complacency is always dangerous.Be wary of trap.
When everyone is convinced nothing is going to happen till January, chances of something dramatic happening are very high. Anyone who has been around the market for any length of time knows that it can be very, very dangerous when everyone (the bulls and bears) is convinced of the same thing.
You must have a plan in place and be prepared for a possible pull-back. Conditions are ripe for a complacency trap to be sprung on the market.When everyone expects nothing to happen, a programme buy or sell can catch so many off guard.
There has been a steady deterioration in the leadership group. Slowly, one by one stocks which were the first to burst out when this tally started are deteriorating. The stocks making 50% or more move in a month indicator is at 5 stocks level currently after being in 15-20 range for entire duration of rally. Stocks making 100% move or more has deteriorated steadily in last one week. The stock making 25% move in 65 days has started deteriorating rapidly. Number of stocks from high EPS earnings breaking out has deteriorated, many which are breaking out are not moving forward, are stalling or reversing on failed breakout. Some of these and many other things are shadowed by action in few momentum names. Many of those names are highly speculative and are not the one to lead rallies higher.
Top 30 stocks on momentum scan:
ACOR,Acorda Therapeutics Inc (Google Yahoo Earnings BW Chart)
AOB,American Oriental Bioengineering Inc (Google Yahoo Earnings BW Chart)
AXR,Amrep Corp (Google Yahoo Earnings BW Chart)
AZL,Arizona Land Income Corp (Google Yahoo Earnings BW Chart)
BRLC,Syntax-Brillian Corp (Google Yahoo Earnings BW Chart)
CHTR,Charter Communications Inc (Google Yahoo Earnings BW Chart)
CLWT,Euro Tech Holdings Ltd (Google Yahoo Earnings BW Chart)
CRVL,Corvel Corp (Google Yahoo Earnings BW Chart)
ENPT,En Pointe Technologies (Google Yahoo Earnings BW Chart)
FTGX,FiberNet Telecom Group Inc (Google Yahoo Earnings BW Chart)
GIII,G-III Apparel Group Ltd (Google Yahoo Earnings BW Chart)
GOAM,Goamerica Inc (Google Yahoo Earnings BW Chart)
GROW,U.S. Global Invest Inc A (Google Yahoo Earnings BW Chart)
GVP,Gse Systems Inc (Google Yahoo Earnings BW Chart)
HGO,Houston American Energy Corp (Google Yahoo Earnings BW Chart)
HTI,Halozyme Therapeutics Inc (Google Yahoo Earnings BW Chart)
IAAC,Internat Asset Holdg Cp (Google Yahoo Earnings BW Chart)
JST,Jinpan Internat Ltd (Google Yahoo Earnings BW Chart)
MAMA,Mamma.com Inc (Google Yahoo Earnings BW Chart)
ONSM,Onstream Media (Google Yahoo Earnings BW Chart)
PCCC,Pc Connection Inc (Google Yahoo Earnings BW Chart)
PGLA,Progen Industries Ltd (Google Yahoo Earnings BW Chart)
PTT,Vcg Holding Copr (Google Yahoo Earnings BW Chart)
RAND,Rand Capital Cp (Google Yahoo Earnings BW Chart)
SIGA,Siga Pharmaceuticals Inc (Google Yahoo Earnings BW Chart)
SOFO,Sonic Foundry Inc (Google Yahoo Earnings BW Chart)
SQNM,Sequenom Inc (Google Yahoo Earnings BW Chart)
STEC,Simple Technology Inc (Google Yahoo Earnings BW Chart)
TGEN,Targeted Genetics Cp (Google Yahoo Earnings BW Chart)
UAHC,United American Healthcare Cor (Google Yahoo Earnings BW Chart)
What can go higher, yes there are stocks and groups which can go higher. I am keeping an eye on around 100 stocks like that. Expanding the momentum universe to 5% can give you much better read on which are likely to lead in next phase. The top 2% are slowly deteriorating one by one but they will be replaced in relative ranking by others. It does not take much to get fully invested on long side, if the market does start rallying. But I have serious doubt about it at this stage.
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