Wednesday, January 23, 2008

01.23.08 - Churn and Burn

Here is the teaser excerpt from Yahoo!Finance -- note the underlined portion...

Wed 1:00pm ET-
The stock market falls to fresh session lows, without a specific catalyst for the wave of selling pressure. The major indices are currently trading...

Clear rotation occurring with last year's winners being sold hard and reinvested into last year's losers, specifically those that will benefit from lower interest rates. By way of example, compare and contrast QQQQ & XLE versus XLF & IYR.

The bull's hope is that these components will constitute the new leaders. This is why I advised my clients to think carefully before selling their (diversified) losers at last year's end. When we bounce, I expect all ships will rise for a period of time. At the close I will post a sector recap.

After the Close:

This has been a gut wrenching period reportedly on the scale of World War II level downward volatility. I wish I could say with confidence that today's turnaround was the definitive short-term end to it. It probably is, but this is a very erratic market.

The potential reduction of counter-party mortgage default insurer risk is a huge development. Did you get the sense that news may have been leaked earlier in the day? Whatever, for today we'll take it.

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