There Is Chum In The Water

The semiconductors are ripping and that doesn't make Don feel warm and fuzzy.

Don don't feel warm and fuzzy that the semiconductors are rallying, because nobody gives two craps about them, and they're going to come back in. They will sell the semiconductors again.

Why, Don, why?

Because there's chum in the water, and when there's chum in the water, they will come to feed.

What you're actually looking at

This is a reflexive rally, and it's being done on the back of all the wrong players.

It's the quintessential dead cat bounce. And yeah, it can have a little bit of legs. Yes, your dead cat can have legs, and it might run for a couple of sessions and feel like the all clear the whole way.

Mark my words, they're going to come back for this, just like they did in the South Korean markets. Those semis are tied at the hip with Korea and they trade like the same instrument.

How you tell

Pull up the advance decline line.

We've got a highly negative advance decline line on a day that's clearly an up day. That should bother you. For those of you going it's a rally back baby, they've got my back again, this just basically means it's the same crap, different day.

The market breadth stinks because it's all semiconductors. All semiconductors, all the time.

Then look at how narrow it is. Microsoft's up 17% on a $3 trillion company, so there's roughly $450-$480 billion rushing back into one name today. Intel's up 10% and Intel in its entirety is a $450 billion company.

You go, but what about AMD? Nobody cares about AMD. It's only a $700 billion company and it's up 10%.

That's how stupid we've gotten. What is this market today? It's Microsoft. Everything else is fodder.

So what do you do

Sit on your hands. Duct tape them to the damn seat.

You don't have to short it and I'm not telling you to. Just quit treating a bid back like a bottom, because if you treat this as anything more than a bounce you're going to be in some pain in the very near term.

Can it turn into something real? Sure it can. The breadth just isn't telling you that yet.

Look, if you're going to go chase something green today, at least know what you're paying for it.

There's a cost that bleeds out of a position every single day even when you're dead right about the stock, and there's a ten second check that catches it. That's one of five I go through before every trade.

No credit card, nothing to cancel. Just go get it.

Grab the checklist here.

To your success,
Don Kaufman