We Lacked a Purge

 | May 14, 2012 | 11:25 AM EDT
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It is just plain dismal out there this morning and even the dip buyers are having doubts for a change.

Given how well we recovered from poor opens last week you'd expect some routine dip buying, but this steady flow of bad news and constant pressure is taking a toll. Even when you do play a bounce you simply can't have confidence that it will last.

In some ways the fact that we did hold support levels and bounced back from some sharp dips last week may have been a negative in that we never had the sort of panicky purge that gives us a real washout. The idea of capitulation that flushes out the bearishness is a bit too convenient in most cases, but there is no question that market bottoms are a function of hopelessness and disgust.  When we have aggressive dip buyers every day we never get that level of emotion.

My advice recently has been to stay out of the way and not be sucked into the bottom-calling game. That feels pretty good this morning, especially since we are now making new intraday lows. Not losing money is a great way to outperform in a down tending market.

I'm sitting mostly in cash but have my eye on a few potential Facebook sympathy plays including Zynga (ZNGA), Renren (RENN), Firsthand Technology Value Fund (SVVC), Quepasa (QPSA) and a couple others. I don't have any large positions in these names, but I'm tracking them closely and will be more aggressive if the interest levels increase. Right now the speculative money is gun shy since the overall market is so poor, but they will step up if others start to show some interest.

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