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August 11, 2006

The Great Humbler

On the surface, today's final tally shows the S&P 500 down less than a half percent and the Nasdaq 100 down a little over a half percent. The undertow felt much stronger. We saw a market leader, Google fall away from its triangle in what now looks to be a decisive failure (back test complete). We also saw a slew of high-profile tech names hit for 1-4%, including Intel, Lam Research, SanDisk, Micron Technology, and F5 Networks. The options back-dating scandal appears to be adding a lot of weight to F5 shares. Add to the long list a new perpetrator, Nvidia, which announced it would not file its second quarter results with regulators in a timely manner due to a back-dating investigation. If more companies start missing deadlines for their regulatory filings due to options malfeasances, this topic will weigh heavily on the market as a whole.

Gold and silver continued their post-pause funk with slides of about one and two percent, respectively. The action in the metals these days is primarily technical, in my opinion. Once the after-effects of spring's vertical leap are worked off, the market can get back to the business of driving prices seriously higher.

A massive short squeeze developed late in the day on an old favorite, Building Materials Holding. For no apparent reason other than bears fighting each other to get out of their positions, BMHC shares went vertical to the tune of 20%! I have been out of my shorts on this one for some time because the chart kept telling me that momentum was turning positive, but I certainly did not anticipate this type of action. I also could not resist the gift and so sold a modicum of shares into the frenzy. The action in BMHC just goes to show how quickly the market can humble overconfident players.

Disclosure: Short INTC, LRCX, SNDK, MU, BMHC; Long GOOG, INTC, SNDK, NVDA Puts


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