No Man’s Land
January 5th, 2007 by Buck Woodford
Market players experienced a raucous first session of 2007. After an early triple digit upside move in the Dow, stocks got trounced in the afternoon. The selloff was blamed on the 2pm release of minutes from the December 12 Fed meeting where some fella made a hawkish statement or two. After the morning’s gift, traders simply needed an excuse to pare back & that was the raison du jour. Still, it got pretty violent at about 3pm before the dip buyers showed up.
Today the indexes sold off some more, before grinding higher in the afternoon. But as Trader Mike aptly notes, the action was strange. The rally was extremely narrow, and the previously weakest sectors provided all the juice. Meanwhile energy, steel, miners, & other commodity stocks got destroyed for the 2nd straight day. If in hindsight it becomes a longer term shift, this was one hell of a way to start a sector rotation. (I’m also wondering how local gasoline prices haven’t budged with oil down 5 bucks in two days.)
High growth, small cap energy plays (BTJ, ALY) that worked great just weeks ago have each suffered consecutive 10% selloffs. We went to 100% cash at year-end so missed all that destruction. It didn’t feel good but we did buy back our position in BUCY — a mining equipment stock — amid the chaos.
The Russell 2000 chart is about representative of the major indexes at this point. A bounce off lows for the second straight day, but not really going anywhere big picture — just chopping, as it’s done for the better part of six weeks now.
Jobs report out in the morning should shake things up. Any big gap up & we’ll be looking to short IWM & others.
Long BUCY
