Snapshot Notes - September 28, 2006

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THURSDAY, SEPTEMBER 28, 2006

PostCloseSummary

09/28/06 5:00 PM EST

Today was a do-nothing day in terms of directional movement in the major indices. This morning we saw the NDX break below its previous high and the S&P head towards the same, but buying pressure came in again and pushed us close to the day's highs.

This kind of thing is why I'm requiring more confirmation before trying to bet on further weakness. We've seen very persistent buying pressure, and it just doesn't pay to continue to look for a pullback that possibly won't come for several more days.

The alternative (other than my preference of sitting in cash) is to bet on a further rally, but given what we've gone over the past couple of days, that is higher risk than I like to take. I mentioned the other day that this has the feel where apparently the best thing is to just close your eyes, plug your nose and buy, and so far that's proving to be about the only thing that's making any money. That's not my bag, and I think further gains would be given back in fairly short order, but given the way this thing has behaved the past three days, I'm not betting on an air pocket (i.e. swift, unexpected move to the downside) hitting just yet.

Have a great night and we'll see you tomorrow!

ApproachingTheBell

09/28/06 3:25 PM EST

Every time it looks like we're finally going to roll over a bit, buying pressure comes in and saves the day. It sure feels like someone has a vested interest in making the Dow tick at 11,751. The kind of trading we've seen this afternoon is exactly the reason I have not been willing to press any short-side bets until we see evidence that this buying pressure is less likely to step in again.

The problem with waiting for confirmation is that by the time we get it, prices have already declined and the chances for a whipsaw increase. But the benefit, which I think outweighs the whipsaw risk in this case, is that we can avoid getting caught in a seemingly never-ending cycle of betting on a pullback that doesn't come until we're too tired of looking for it.

So I continue to basically do nothing trading-wise. The risk of buying here is too high for my tastes, as is the case with shorting, so I'm sticking with keeping things conservative and earning interest until something with a better risk/reward comes along.

LunchtimeLull

09/28/06 12:25 PM EST

The major indices have continued to struggle, though the weakness has been moderate. The NDX is back below its highs from last week, but I've been waiting for the S&P to fail as well before becoming more interested in trying to bet on further weakness.

Our intraday guides have of course been backing off their overbought readings from yesterday morning and are not really a factor at this point.

MidMorningOutlook

09/28/06 10:25 AM EST

Good Thursday morning...The AAII sentiment survey released this morning (which includes responses collected through last night) showed a slight uptick in bullishness, but is still not what we could reasonably consider extreme.

The percentage of bullish respondents rose to 51%, the highest since the May market peak, but the number who said they are bearish is still quite high - which means that a whole lot of folks have a definite opinion one way or the other, and there remain few who are stuck on the sidelines. This *should* result in a relatively strong move one way or the other as one side realizes the wisdom of the other and tries to hop on board.

As for the short-term, we had a brief try to the upside right after the open, but that was sold immediately and the major indices are mixed at this point. I noted yesterday that there are a fair number of pieces in place to once again suspect a pullback is close at hand, but because of the seemingly abnormal market movements over the past couple of days, I don't have a strong desire to press the short side unless I'm given some evidence that we're not going to get stocks "pulled up by a string" again.

If the S&P traded back below its previous high of 1327, that'd be a good sign that was the case, so I'm looking for a move back below there before becoming overly anticipatory of additional weakness.

All the best,

Jason Goepfert

President and CEO

Sundial Capital Research, Inc.

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