MARKET COMMENT
November 14, 2006
THINGS COULD BE WORSE!
Well, maybe not. D.R. Horton [DHI] reports profits down 51%,
but that beat estimates and boosted the stock nearly 10% squeezing shorts. But, if you read more here
about these earnings there still seems trouble ahead with inventory backlog and
margin pressure. Like our escapee friend
above, it’s one thing to dig your way out of trouble; it’s another to find the
right reward. [Today, the end of the
above great escape belonged to short sellers.]
Here’s the deal folks; if you’re on
the “short stack”, the guy with the “big stack” more often than not is going to
win. Most of us little guys are on the
“short stack” playing against hedge funds and trading desks that are firmly in
control of this market. Please examine
the 5 minute chart below and you’ll see what’s going on clearly.
Today
the day begins with some impressive selling volume which dries up
around 11 AM. Then all is quiet. “Da Boyz” with the “big stack” toss
some chips in [buy orders] and start probing for any resistance.
Finding none, they toss in some larger bets just before 1 PM. After
meeting little selling, they make larger bets and then wait to see if
any “short stack” sellers try to fade their play. Again there is none
and they go “all in” around 2:45 PM causing a full blown short squeeze
into the close.
Producer Prices [PPI] were lower
than expected meaning no measurable inflation at least by this method. Bond prices rallied on the news and retail
stocks were well bid despite lower retail sales data due to lower gasoline
prices. [Think convenience stores.] Also, Home Depot reported disappointing sales
due to the housing slowdown. But the
stock closed up over 4% on the day. It
must be because they announced later that they were going to start selling flat
screen TVs. Who knew!?!
The above covers just about every
corner of the planet and you can readily see markets moving higher—even those
that may not seem to deserve so. But
those are the realities of the trends.
If you’re on the “short stack”, you’d be foolish to mess with “big
stack” players DBA “Da Boyz”. We just go with the flow.
Disclaimer: The ETF Digest maintains positions in: QQQQ,
SPY, IEF, IBB, FDN, HHH, PZJ, PZI, EWP, GLD, EWA, FXI, EWM, IFN and TRF.