Gunga galunga…gunga — gunga galunga

  • February 9, 2001
  • Goran Yordanoff

So
I jump ship in Hong Kong and make my way over to Tibet, and I get on as a looper
at a course over in the Himalayas. A looper, you know, a caddy, a looper, a
jock. So, I tell them I’m a pro jock, and who do you think they give me? The
Dalai Lama, himself. Twelfth son of the Lama. The flowing robes, the grace,
bald… striking. So, I’m on the first tee with him. I give him the driver. He
hauls off and whacks one — big hitter, the Lama — long, into a ten-thousand
foot crevice, right at the base of this glacier. And do you know what the Lama
says? “Gunga galunga…gunga — gunga galunga.” So we finish the
eighteenth and he’s gonna stiff me. And I say, “Hey, Lama, hey, how about a
little something, you know, for the effort, you know.” And he says,
“Oh, uh, there won’t be any money, but when you die, on your deathbed, you
will receive total consciousness.” So I got that goin’ for me, which is
nice. 

— Carl Spackler (Bill
Murray) from “Caddyshack”

Well,
the Nasdaq Composite received total consciousness today as the index
shed nearly 100 points on the coattails of its former darlings
(
JNPR |
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(
CHKP |
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(
SDLI |
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(
GLW |
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(
ARBA |
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PowerRating), and friends.  It appears as though our analyst friends who hyped
the Nasdaq “breakout” two weeks ago are nowhere to be found as
unsuspecting retail momentum traders had bids pulled in their collective faces
today.  Where are the institutional buyers we heard so much about two weeks
ago who had to put all their “cash” to work’?  Thank goodness we didn’t fall
for that old bait ‘n switch again.

At present, the Nasdaq Composite is looking like it may have a date with its
Jan. 3 lows if it violates today’s low of 2455.87.

Amazing how all the
buyers of technology stocks we heard so much about pre-FOMC have been nowhere to
be found.

However, it appears as though the tobacco stocks Philip Morris CO.
(
MO |
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Reynolds
(
RJR |
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PowerRating) have been the new “go to” guys for the Bulls. In fact, an
examination of their respective charts reflect virtually no pullbacks in the
past five months (these charts were featured in my Feb. 5 article).  Not
only has Wall Street decided that  the multi-billion dollar judgments
against big tobacco not matter, but cigarette smoking may actually cure cancer? 
The runs in their stock prices certainly look suspiciously close to some of the
biotech stocks of ‘ole that would report favorable drug trials. 

By reviewing the technicals of these two stocks, it is clear that they are
displaying significant negative divergences that do not confirm their stock price appreciation.  I’m going to draw the line in the sand right here,
right now.  During blow off rallies, you will sometimes see relentless
moves up with few, if any, pullbacks.  Sometimes, they will overshoot your upside
targets, only to fall back and sell off precipitously when they topple under their own weight. 

The line in the sand is
this:  If RJR and MO appreciate another 5% and remain there for two months,
I will make my presentation at the TradingMarkets2001 in Las Vegas this year… wearing a thong, and nothing else. The Wall Street pigs have gotten
very fat on these two names at the expense of sucking in retail buyers under the “recession
proof” and “safe haven” monikers.  In dire economic times,
there is a flight to cash, cold hard cash… not tobacco stocks.

Interestingly, CNBC paraded out a tobacco analyst early this morning who gave a
no-holds-barred shot in the arm to the sector with his glowing recommendation on the fundamentals of the sector. Okay, boys, you are making
this a little too obvious now.  Naturally, the analyst didn’t state whether or not his firm was buying or selling the
stocks… but we can venture a guess.

For the weekend, I believe the retail sector and specialty apparel stocks have a
lot more to go on the downside. Technology names seem to need a successful retest of key levels on increased volume and relative strength. 
As I have stated since the FOMC meeting, it appears the sector has more soul-searching
to do. 

Have a great weekend.

Goran