Unexciting and Unconvincing

Both the Dow and Nasdaq were both up today in very light volume. 2 Days after Investors Business Daily signaled a “follow through day” (basically the “ok” to buy stocks in their system), I remain unconvinced.

Steady Eddies like Kraft Foods (KFT) took a break today, along with a few other mega cap firms that I have been watching as bellweathers (remember, I am theorizing that pension fund and other large investors desire big ‘safe” companies with reasonable growth and dividends as a replacement for bonds). A few like Hershey (HSY), moved up with the market.

Tech Confusion

Oracle (ORCL) did NOT bounce back today as it might have in the past (it is a tech stock you know and deserves to be overvalued:), but Salesforce (CRM) bounced back slightly from yesterday’s slap session. B2B tech stocks took it on the chin yesterday as investors likely theorized that a soft revenue guidance from Oracle meant softening corporate spending for many of the companies that sell to businesses, companies like like Salesforce and Microsoft.

Some stocks that I follow that have been in the cellar are trying to move up – I suppose trading at 2-3xs cash flow is cheap enough for a stock to fall. Some income payers like MLP Kinder Morgan (KMP) and phone company Verizon (VZ) drifted up, while some others drifted down. I have pointed out before that income paying stocks are hot – we have Jim Cramer recommending them and who can blame the investors – again, the alternative is the ticking time bomb, aka US government bonds, which pay less and carry huge interest rate risk.

Gold and silver still look iffy as some excellent traders have pointed out that the silver chart especially, looks like a descending pattern (meaning more potential drops in silver prices). Of course the mining companies aren’t doing well as a result. The market for whatever reason, is not buying.

Summary

Overall, this day was by no means a bull investors call to arms. Because the scene looks shaky, consider pursuing any investment ideas through a LIQUID vehicle. In other words, consider making sure there is enough volume in what you are investing in that you can sell easily if you use stop losses. If you are risk averse, diversification might help – keep in mind that there won’t be any opportunities to earn 5-6% in the bank any time soon, Bernanke has assured us of that.

So diversification is the next best thing (cash under mattress = inflation loss). for example, noted financial expert Marc Faber recommends a portfolio of 25% stocks, 25% real estate, 25% gold, and 25% cash – not sure if that works for you but it covers many bases.

With that said, I am unconvinced by the current environment. I have some trading ideas put on but am ready to take them off if necessary (notice that I don’t follow my feelings only). ¬†Currently I have 2 long term investment positions (both positive), 3 trading positions (all 3 +/- 1%, ¬†recent entries), and 10 small discovery* holdings (my discovery portfolio is having a very rough year and accounts for 95% of my losses). My discovery positions become more illiquid as the market goes down so I had better believe in what I own! The trading positions will get nixed or I’ll let them run based on the charts and my investment positions I’ll hold unless my thesis changes.

At the time of this writing, I or my clients own the following investments mentioned in this column: gold

Note: this article is meant to be some helpful thoughts to share and not investment advice specific to you. Please consult your own advisor regarding investment and financial decisions. See our disclosures page