Liquidation..

It's conceivable to assume that there's liquidation process going on out there.   Of course, it is the kind of liquidation that is being forced by funds that simply had enough of a beating.    What we don't know at this point is how many other "market neutral strategy" quant fund out there that's in trouble and in a process of liquidating or simply shutting down.     Well, that is the world most of us don't have any exposure with.   So, we can only speculate based on the action out there.   This kind of chain reaction creates fear and we don't imagine fear is a good thing for this already fragile market.    Eventually, market will find a stable ground and fear gets subsided.    As far as today's closing bell goes, things don't look that promsing.

Is there any point to speculate what might happen tomorrow?  To us, there's simply nothing out there that can give us an educated guess of what can possibly happen.    How about putting it this way....  more bad news means more bad tape and no news can potentially mean a rebound.    Well, analogy like that is making us NOT to want to carry any positions overnight.    We hate dealing with unknowns and if the market does not give us any kind of reading, we just stand aside.    Fortunately, this kind of suspense can only last so long and one way or the other market will give us a clearer direction where it wants to go.    At mean time, we keep our watchlist tight and up to date.    It's definitely a good idea to cross off those plays that have either fallen out of favour or have technically deteriorated badly.

Here's a couple of green plays...

FCN, we are actually being overwhelmed by the resiliency of this play.   It tacked on over three points on a day where most other stocks have dropped miserably.   To us, as much as we respect the momentum behind this play, it does feel that it's run up is a little too extended.   Nothing goes up forever and pullback is necessary for a sustainable move.    This one would definitely be one of our favourite to get back into on a pullback.

LKQX, it's so ironic that half of the stocks we cautioned as being too extended yesterday have fared really well today.   This just proves that these stocsk are strong for a reason.    On a good day, strong and weak stocks all hide behind the index gain.   On a day like today, that's where the real winners get separated from the wannabes.    Basically, same treatment as the FCN, we aren't inclined to chase anything today, given the cloudy nature of the entire market.   We'd look for these ones as the leaders when market does decide to rebound.

The bottom line, we don't want to get caught in someone else's liquidation process.   Let the other big boys pick up whatever the shares they want to dump.   We'll stay at our own course and be selective about our  own plays and setup.