Day 1 of the New Rally

Stocks snapped back HARD today rising after four difficult down days. We had the right idea, selling what wasn't acting well, however the weakness in our other holdings gave us indigestion anyway. It would have been nice to take some profit at the highs on RIMM, AAPL, GOOG, etc. but we had built up a substantial cash position anyway. We tried to put some of that to work this morning but unfortunately the big Wall Street 30% off sale was closed. I saw no reason to pay up today thinking our former big winners turned very recent losers would give us a big lift. Indeed they did with the likes of the aforementioned rising 4 to 14% today so we got back a nice amount of performance and we still have our cash. The fact is that the advance decline line still stinks, and the new highs and lows have a similar bad odor. Perhaps the only bright spot is the volume which ran very high during the selloff and maybe exhausted the sellers.
Here's what will happen next...the bulls will continue to buy thinking the selling is overdone. The bears will sell into their rally expecting the other shoe to drop on housing, mortgages, the dollar, inflation, etc. At that point we will see if they can take the market below yesterday's close or if the bulls will step in once again. I believe the market can go higher but the technical damage to stocks needs to be fixed which 0nly time and money can do. While there is a chance that buying today would have been the right thing, I'm comfortable waiting to see what happens. Our returns to this point have mostly been outstanding so why force the issue with so much unclear. Better to be on the outside wishing we were in (for more) than being on the inside wishing we were out. Stay tuned.

New Things to Worry About

Now its oil at almost $100 on top of the writedowns from sub-prime stupidity and significant weakness in the financial sector. Then there's Gold soaring to 28 year highs that makes us realize the inflation train could be getting ready to leave the station. And, if the $ keeps falling against the euro (and anything else on the forex markets) that situation will only intensify. Add this to the continued weakness of the NYSE advance/decline line, the negative new high/low list, and the upside down volume flows. There are other negative divergences but let's not get too negative here.
Fact is, we don't invest in or directly own any of those things that I mentioned. We own stocks and other than most of them, there are some stocks that just won't quit. RIMM, GOOG, & AAPL each set a new 52 week high today. Other names stay close to their upper range and act well so we stay with them. And others feel like the momentum is shifting and we lighten up there. As long as we stay flexible we'll do just fine. Stay tuned.