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Thursday, August 05, 2004
Good evening friends,
Market Recap
I do not want to seem too enthusiastic about this big sell off today, but it is hard not to be when we have 13 open short positions and the market has these big down days. It is nice to know we are on the right side of the market again. Today the Dow sold off over 160 points, the NASDAQ was down 33 points, and the S&P was down 17 points.
If you are long this market, you are fighting the trend. We have been short for a while and we have been warning that there is no end in sight to the market's down trend. Tonight, the trend continues and being long on most stocks now is financial suicide. There are only a selective few stocks that I would be long in, and even those are on the verge of becoming caught up in this selling frenzy.
The Dow closed below 10,000, and the NASDAQ is headed for its next support area of 1790. A while ago I mentioned that the NASDAQ could eventually fall to 1650, and it looks like it is headed in that direction. As we have stressed almost daily in the commentary over the last 7+ months, there is a time to be in the market and there is a time to be sitting on the side lines and preserving your cash. Nothing has changed; we are still in the preserving cash mode until further notice.
Trade Wisely
If inclined to trade, please trade wisely. Close positions quickly when you are in the money and above all, cut your losses quickly. If you are trading, you should be on the short side so you can profit from this market decline (most average investors are feeling the pain). Average investors are stubborn, they refuse to sell for a small loss and because of this mental block, their losses quickly accelerate in these types of down trends. I know this, because I too was an average investor at one time.
Late to the Party?
As there is not much else to discuss market wise, let's talk about Google again; it has been entertaining to follow this IPO. We may have a few analysts as members of TWPD. Did anyone happen to pick up on the latest article from CBS Marketwatch analyst, Bambi Fransisco? Here is a link to the article; it is quite an interesting read: http://tinyurl.com/3toae
It would appear that someone else feels that the Google IPO is not only priced well beyond where it should be, but also that there are better buys out there in the internet search engine sector. Apparently the Dutch auction that Google is attempting to use to sell shares to the public is not going over very well at all. With a $500 price of admission, it is not surprising.
Google has their IPO priced well beyond the range of the average investor. We had a commentary about this about a week ago, “Is Google a Goof?” The common investors will not plunk down $135 a share for Google. It is not worth that kind of money and everyone knows it. On top of that, the timing for marketing this IPO could not have been worse; the market is not looking good at all. Perhaps they should have done a search on Google using the key phrase “the best time to price an IPO”. They may have learned that this is not it!
Now the main stream media is starting to pick up on this overpriced behemoth of an IPO. Not only that, they are going so far as to say that there are better buys out there in the search engine sector. Funny… we mentioned that right here in a commentary from Tuesday, July 27th. Looks like in this case we were a solid week ahead of the mainstream media when it comes to knowing where stocks are going.
It will be a very interesting day of trading when Google goes public. I do not think it will have a significant impact on the remainder of the IPO's put out this year. No one else is arrogant enough to try and price that high. This is not 1999.
Now, who will admit to passing along our commentary to CBS Marketwatch? (heh, heh) They need to get their news from someplace, may as well be getting it from TWPD, I think we are as reliable as anyone else.
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