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Friday, November 9, 2007

When The Momos Lead The Way Down

On October 10th in the post When The Momos Go Parabolic I warned about the momentum names.

“I'm throwing up a few of the big momentum (momo) names that have been powering the market higher. Note the chart scale is no longer logarithmic. This helps illustrate just how fast these guys have done a moonshot. Note: the momo names go parabolic at the very end of the Bull market cycle. Unfortunately they can keep running for quite some time, so picking at top isn’t exactly easy… That being said, with all the indices at new record highs on anemic volume, a pullback is in order. The catalyst may very well be a disappointing earnings season. Alcoa started things off with a less than stellar report as did Chevron. Trade cautiously... book some of those profits.”

The damage is swift and savage. Intraday the Nasdaq 100 was down over 4% and all the big momo names were down close to or in excess of 10%. When the big momo names lead the way down the Bull is probably dead for good.