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Friday, March 7, 2008

SOX diverging from rest of indexes

I've become uncomfortable with the short side here as I sense a lot of forced selling. Forced selling isn't rational - it's a preservation instinct. It disregards price to achieve liquidity. It's emotional. Those sales are not motivated by profit, they're motivated by loss. I don't want to be in that crowd -- I'd rather take the other side.

I freely admit that business is slower and that we're in for lower growth going forward... but I also think earnings need to decline dramatically to justify the current prices and the deceleration is going to be a slower process than the velocity of the current downtrend would indicate.

Just an observation. The SOX has been outperforming both the NDX and the SPX for the last several days. Maybe tech is getting washed out. Maybe.

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