So, it was a delayed reaction, after all. A day after the FOMC stated, much to the chagrin of the one-and-doners, that more rate hikes may be necessary, equities got thrashed. Tech stocks were the hardest hit, with well over 2% knocks in the NDX and Nasdaq Composite. A quick scan of my lists shows sharp losses in Apple Computer, AMD, Google, Yahoo, Adobe, Cisco, Starbucks, Lam Research, Netlogic Microsystems, and Broadcom. In some cases, such as Broadcom, Yahoo, and Adobe, the charts appear to be in full breakdown mode.
As you know, I've been building my shorts over the last couple weeks. However, one never feels short enough when a day like today pops up. Today's action begs the question of continuance. We could have simply been witnessing the unwinding of some hedge fund bets around the Fed meeting. The point to ponder in this case would be whether the action was strong enough to trigger further selling. If not, we could see a fairly rapid snap back to the upside.
I think the odds favor a continued unwinding. After all, I have been writing a lot recently about my belief that markets would sell-off in the wake of this latest Fed meeting as traders become disillusioned of the one-and-done theme. Seeing the idea potentially coming to fruition, I increased my short exposure late in today's session. If the markets do not behave as I expect, I will quickly cover those shorts and look for new entry points.
One would think that if the one-and-done crowd were capitulating, precious metals would also take a hit. On the contrary, both were up sharply today, with silver briefly eclipsing its previous high before giving up about half its gains. However, commodities traders are a different jar of nuts than equity traders, so we cannot necessarily expect them to assimilate the same information at the same time. Case in point, mining stocks were quite weak today in the face of the new highs in metals. One of these groups has got it wrong, and I believe this time it's the comm traders. Gold and silver are simply riding intense momentum at the moment and are likely to suffer renewed selling, in my opinion. Perhaps this opinion is just wishful thinking. I feel a bit naked without my full silver position, but it certainly feels too risky to position-build at this point in time.
Disclosure: Short AAPL; Long GOOG, YHOO, LRCX Puts