Caution in the air, or is it just us?

We suppose if we are not going to be cautious with a -54 Naz day, then when will we ever be cautious?    There's really not much to digest today other than what appears to be a devastating index loss.    The individual action, though seemingly not that bad makes us feel that it may be just a matter of time before the negativity spills over to the small cap side.

It's a fact that we've had a tremendous run since Sept. and we really haven't had a meaningful pull back.   We thought we'd get one near the end of October but that quickly proved to be NOT the case.     Is this the beginning of a trend reversal, was this the crack?.   We don't know and at this point, we'd give it some heavy weighting toward this thesis because of the long rally we just had.    Similarly last year, December was merely so so and there was a lot of backfilling type of choppy trading action.      For this markets sake, we feel that it's really better for it to go into some meaningful and sustained consolidation mode.     It means that this market will be choppy, which in turn means that there'll be lots of +20 and -20 pts moves.    What this also means that many small caps, especially the type we trade,  may end up being the casualties of the markets choppiness.      At this point, we don't know how some of the DJIM stocks are going to hold out but in this business, no matter how much you like a company, seeing is believing and action speaks louder than words.    We will be very selective on our plays and setups and define our entry/exit much more tightly until either the market stabilizes or it clearly reverses back up.

Of course, all these cautionary talk may prove to be an over reaction if Naz pulls +100 pt in the next couple of weeks.    Until that happens, we are going stick to our game, and do what our experience tells us to do.    That is to sit tight with lots of cash and play selective and small.

cheers,