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Thursday, October 2, 2014

The Market Tanks, GoPro Sells Off and Someone Had Today's Paper Yesterday

      It's a great line-'someone today's paper yesterday' made by Jon Najarian on 'Fast Money Halftime Report' today at 12 on CNBC regarding the big selloff in GoPro (GPRO) today that was driven by the loophole some some executives discovered in the self-imposed lockout in GPRO shares.

     The stock dropped over 11 bucks today. As the analysts said, it turns out that a big part of GPRO's big up move was having a small float.

      I've been bullish for a long time and got some good calls lately in Bank of American (BAC) and Gilead (GILD) but I've been won over to the short side at least for now. I don't think this is like 2008 when the world was genuinely about to end, but it's clear that for whatever reason, this market wants to go lower.

     After such a big selloff yesterday and last week today it should have been able to at least give us a little bounce. Weekly unemployment claims came in at just 282,000 but this didn't help the market which is down a lot again today.

     I got  into 10 puts for CAT at the $97.50 strike for Oct 18 and it has been working so far for me as I'm up $500 so far.

     I did leave most of my position on in Alibaba-I actually bought stock outright on that and while I took off 30 shares this morning I left on 60 and now the stock is actually up today. While yes I like many bought the stock at the top on the IPO Friday morning the stock really has behaved very well since with only a very mild decline since. After getting under $86 briefly, it has snapped back to over $87.

     I do think that what has worked for so long-buying on dips-has broken down. Luckily I got out of my BAC calls this morning. From here on out I'm presuming a market that will go lower short term. In the long term? I don't really think the fundamental U.S. economy seems pretty sound. Certainly it's in better shape than the EU and even China seems a little soft lately.

     Tomorrow morning we'll have what is a big moment every month-nonfarm payrolls. Last month was disappointing with a number of only 142,000, I don't know what the number will be but my guess is it will be higher. Jim Cramer says one month on payroll can never be a trend-that only if we get another bad number tomorrow will there be a trend. My guess the number will be at least decent, maybe good.  I think it's quite possible to be over 200,000, maybe well over.

      The trouble with the market right now is that good fundamentals don't seem to help. The market wants to sell off and seems to always find an excuse to do so every day right now. My guess is even a good payroll number won't lift the market. This isn't surprising when you remember that the selloff was never chiefly about fundamentals anyway; Cramer thinks the Russia-Ukraine problem is driving the market more than anything which is hurting commodities which is hurting Europe and hurting the market. As he also puts it we're in a 'bear market in commodities.'

      So tomorrow the X factor may be the payroll numbers. However, the Y factor may be what is decisive this time; at the end of the day this market seems to want to sell off. I don't know that this will be long term to say nothing of the start of a genuine bear market but my guess is it goes on for at least a few weeks. Maybe as September and October are supposed to be weak months anyway at the end of October buying the dip will work again. For now though, it seems to have broken down. 

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