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Stocks hovering near unchanged

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The broader market averages are all hovering near unchanged levels with 90-minutes of trading now complete. Sector strength has been limited to the Biotechs (BTK.X) trading up 1.4% after IDEC Pharmaceuticals (NASDAQ:IDPH) $60.56 +8.12% said the FDA had granted the company marketing approval for its Zevalin therapeutic regimen, which is indicated for the treatment of relapsed or refractory low grade, follicular, or transformed B- cell non-Hodgkin's lymphoma (and you thought triple-top buy signals were confusing?).

Brokerage stocks (XBD.X) are getting a bit of a bounce after their recent drubbing with a 1.39% gain, but I see nothing here that would compel a bull to be a buyer. Looks like profit taking from bears and not a sustainable move without broader market bullishness.

Software stocks (GSO.X) -2.21% are under some selling pressure with the bulk of downside action taking place in Computer Associates (NYSE:CA) $21.13 -16.5% after a recent article that company may be under accounting scrutiny. The company has denied such allegations.

Rumors of potential secondary offering in the near future are impacting shares of Siebel Systems (NASDAQ:SEBL) $29.20 -8.4% and Taiwan Semiconductor (NYSE:TSM) $16.45 -1.2%. The Siebel Systems secondary rumors have been around since late January and there has still been no SEC filing to indicate a secondary is in the works, but it has weighed on the stock in recent weeks.

Accounting is the worry

Today's market action is still indicative that worries over accounting issues are taking the foremost concern among investors. What started with Enron (ENRNQ) has now put terrorism in the backseat of investors minds. The "threat of terrorism" should not be discounted as a potential market event that should still be considered.

While you and I both hope we never see any type of terrorism again, it should still be taken into account when trading or investing.

The current market environment and investor psychology has been arguably shaken more by "accounting concerns" that perhaps the terrorist attacks of September 11th ever did. For some trader/investors, this is troubling and very frustrating. Unfortunately we must deal with it and incorporate it into our trading scenarios. The only way I know to do this is to be open to shorting/putting weak stocks in weak sectors. Then if something bad happens, a trader/investor has put themselves in a position to benefit financially.

To some this is cruel thinking, but if you are shorting/putting a stock based on observed weakness, I don't necessarily believe that you are tying to benefit from some type of negative event. However, if you're just shorting stocks in "hopes" of some negative event like a terrorist attack, then you may find some losses in your account if you've shorted a strong stock and the even never takes place. Stay disciplined.

Jeff Bailey
Senior Market Technician
Option Investor

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