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March 9, 2006

Word Soup

Words don't taste so good, especially when you're eating the ones you put your money behind. Newmont Mining got slammed for another 4% today, despite a rise in the price of gold. Volume on NEM was particularly heavy in the last half hour of trading, during which time the shares gave up about a third of the day's losses. I'm not sure whether this volume signifies capitulation or is a sign of further weakness to come. I do intend to purchase more NEM in the coming days, but I'm not sure what indicator will trigger my purchase. I guess I'll know it when I see it.

Fortunately for my portfolio, tech stocks were weak today. The NDX dropped a percent with the participation of a few members on which I have short positions, such as Intel, Yahoo, Cisco, and Apple (actually, I covered the AAPL short today). While you will read many headlines berating interest rate concerns as the culprit for today's heaviness, I think the slump can be attributed to good, old-fashioned uncertainty. Perhaps rates are a component of uncertainty, but there are domestic and geopolitical uncertainties, as well as conflicting signals from the market itself. If anyone could invent a reliable uncertainty barometer, I'm sure it would be a much more accurate indicator than bull/bear ratios, odd-lot short sales, or even interest rates.

Uncertainties always put the markets in precarious positions, psychologically speaking. When traders are nervous, it doesn't take much of an event to shake things up and precipitate a steep slide. I sense the situation being ripe for such a slide. Perhaps Mr. Market will dodge another bullet, but odds are growing that one of those proverbial bullets will find its mark sometime soon.

Disclosure: Long NEM; Long NEM Calls, INTC Puts, YHOO Puts; Short INTC, CSCO


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