Egypt you say?

The financial media is attributing the sell-off on Friday to Egypt worries. Do you honestly think a sell-off triggered by a social unrest from a country as miniscule as Egypt is going to have legs? Well, if it does it won't be because of problems in Egypt it will probably be due to some other excuse.


This sell-off seems well telegraphed. We hit round number resistance at Dow 12K and SPX 1300. Sell-offs that coincide which such levels to me always suggest profit taking and they tend not to be severe because it’s too obvious and too convenient. Now, the market did close at the lows of the day on Friday which suggest further selling is to come even if there's a bounce Monday. I noticed something interesting. AAII sentiment shows bulls pulling back quite a bit last week and that happened before Friday's sell off. Also, the put/call ratio has been on the high side for a couple days before the sell-off too. This activity somewhat confirms how this sell-off has been quite telegraphed and so probably won't be severe.

I said a few weeks back that I'm not going to get too obsessed about the ST wiggles in the market and so I'll stop right there talking about it. As I said before, it's not a time to be aggressive on the long side but at the same time you need to have courage to stick with positions that you believe are solid LT. Stock picking will be very important for the next several weeks or even months. I had a good week last week with tec.to and wzl.to breaking out. So far my positions are doing how I had hoped they would do which is trade more so on their own accord and less so with the general market. Hopefully this can continue.

One piece of bad news for the bulls is that the worst trader in the world - Lester, switched his 401K from cash to an SPX fund on Thursday nailing the top in true Lester fashion! You might recall several months ago when I talked about how his guy blew up a $300K account trading options whereby practically every decision he made was the wrong one. He trades on pure emotion and impulse. He's already quite pissed that he's down 2% already. So are the bulls doomed with Lester long? Probably not. Lester is fickle and just like how he bought on emotion he will probably sell on emotion either when the losses pile up or when he breaks even and make yet another bad decision. I've seen him do this over and over.