After The War, Here’s What Is Virtually Guaranteed

  • March 31, 2003
  • Peter Navarro



Market Trend:
Down and Dirty

Market Outlook: Bearish

Macroplay of the Week:
(
HITK |
Quote |
Chart |
News |
PowerRating) — Sweet Tooth 

The Broad Market Outlook: 101 Arabian Nights




Last
week’s “pullback week” call ran against the tide of most of Wall Street but it
turned out to be uncomfortably dead right. The bad news is that we now believe
it is going to soon be worse.

Yes,
if the war is concluded by the end of April, there will be a solid relief
rally. But there are balls being put in motion now that virtually guarantee a
very weak couple of quarters ahead, along with the growing possibility of a
double-dip recession.


Tapped out, refinanced-out, terror-averse consumers are sitting glued to their
TV sets (mostly FOX news from our informal poll) and are not out extending their credit
further at the auto parks and malls. Business executives remain at parade
rest. The economy of Europe must inevitably retract (further) as tourism grinds
to a halt and commerce slows to a trickle. Visions of a huge tax cut and the
elimination of the double tax on dividends have been replaced by more sobering
nightmares of budget deficits. Arab unrest throughout the Middle East
threatens to destabilize the likes of Jordan and Kuwait as Iran and Syria test
US
military flanks. Meanwhile, even as oil prices have come off their highs,
gasoline prices are threatening another ramp up — while Venezuela continues to
simmer and Nigeria moves to the front burner and a boil.


Please
don’t shoot the messenger. We just see a wide array of horrible fundamentals
that are unlikely to be overcome by momentum traders and short coverers, should
the war end quickly and decisively and spark a rally. 
Ergo,
any nascent bull market (which we never believed existed anyway) has officially
succumbed to the war quagmire.

The Week’s Macro Data Market Movers:

The
Macroeconomic Calendar


DAY


EVENT

Monday

  • Risk of
    Recession


Tuesday

  •  ISM
    Index

  • Auto and
    truck sales


Wednesday

  • Factory
    Orders

  • Mortgage Applications


Thursday

  • ISM
    Service Index

  • Jobless
    Claims


Friday

  • The Jobs
    Report

* Potential major market
movers in red

With 24/7
war coverage, forget about the macro data — mostly. We see key reports like
the ISM and the Jobs Report this month as the calm before next month’s storm. We don’t see these reports springing a negative surprise this month but
DO
believe by next month, their results will be toxic as the effects of war on the
economy hit full force.

Be on
the look-out for a fall-off in auto and truck sales, which could be a market
mover. Ditto for mortgage applications, which could hit the housing sector.

Art of the Macroplay:
Hi Tech Pharmaceutical

(
HITK |
Quote |
Chart |
News |
PowerRating)

Hot stock in a hot defensive
sector with a particular market niche catering to diabetics and a business model
set to take advantage of expiring patents to deliver sophisticated
over-the-counter and prescription generics. Under heavy accumulation. Chart
looks scary if you are a value investor but it fits the IBD pattern of buy high
and sell higher. Nice-looking technicals. Enter on a pullback with key support
around 19 bucks.


If you
have a favorite macroplay or stock you would like us to consider in this column,
send an e-mail to

peter@peternavarro.com or go directly to

https://www.peternavarro.com.  We’d love to hear from you.   

 

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