Facts, Not Fiction
When
they ring the bell and say we are in a recession, it
is, of course too late, because the market will be in the early stages of
recovery. The institutions have already spoken as to whether it’s a recession or
not. The UTY, the utility index, went to new highs; the energies, a contrarian
play, ran up well before crude oil took off; but the rest of the facts are more
telling.
The cyclicals indicate more
than a soft landing as the papers and chemicals have been decimated, with
(
IP |
Quote |
Chart |
News |
PowerRating)
going from 61 to 28, or -54%, and
(
DD |
Quote |
Chart |
News |
PowerRating) from 84.43 to 40 9/16, -52%. Both
stocks are currently trading around those levels. The rest of the papers and
chemicals have done the same.
(
AA |
Quote |
Chart |
News |
PowerRating) and
(
PD |
Quote |
Chart |
News |
PowerRating), two more institutional
cyclical favorites, have declined approximately 50% each. Some retail favorites
that were momentum trading stocks a short while back have been more than cut in
half, such as
(
GPS |
Quote |
Chart |
News |
PowerRating) -64%,
(
CC |
Quote |
Chart |
News |
PowerRating) -67%,
(
ANF |
Quote |
Chart |
News |
PowerRating) -82% although it did have
a recent rally.
We have seen some big brand
names crash and burn, such as
(
PG |
Quote |
Chart |
News |
PowerRating),
(
BMY |
Quote |
Chart |
News |
PowerRating),
(
G |
Quote |
Chart |
News |
PowerRating),
(
KO |
Quote |
Chart |
News |
PowerRating), and before
that they were starting Warren Buffett funds every other week, with the
philosophy of buying-and-holding a brand name forever. He probably sold into the
froth! On the tech front, we have
seen some extreme drops in stocks like
(
MOT |
Quote |
Chart |
News |
PowerRating) -54%,
(
INTC |
Quote |
Chart |
News |
PowerRating) -46%,
(
LSI |
Quote |
Chart |
News |
PowerRating)
-69% and now
(
AAPL |
Quote |
Chart |
News |
PowerRating) -60%.Â
The semis are extremely
bloody and we now have the year 2000 version of 1995. Semis like
(
MU |
Quote |
Chart |
News |
PowerRating) -54%,
and
(
AMD |
Quote |
Chart |
News |
PowerRating) -53% made new trading lows last week. The internet indexes, the
IIX and DOT, fell 46% and 50% respectively. Banks had their turn in the box with
e.g.,
(
BAC |
Quote |
Chart |
News |
PowerRating) declining 44%.Â
The institutions have
spoken very loudly with their money and the facts say they didn’t think soft
landing. There has been a small pocket of stocks holding the averages up by
their nails and the chosen momentum stocks like
(
JNPR |
Quote |
Chart |
News |
PowerRating) and
(
BRCD |
Quote |
Chart |
News |
PowerRating)
continue to roll on as they are the only game in town, unless you play the
deal-fever stocks in the brokerage industries. I would expect some blood in the
chosen ones before this is over, so if you own any without puts or haven’t taken
your money off the table and replaced your stock positions with, for instance,
long-term LEAPs, then you should be ready to endure some pain if the inevitable
air pockets surface.
You should be watching the
decimated sectors very closely to gauge the perception of the Generals. They
will probably be going back into the sectors long before the pundits tell you we
are in a recession. Some of these stocks are down to long-term Fib. RT levels
and present some interesting long-term option strategies if you really are a
long-term investor.
The semis bear watching
very closely because they are at key RT levels, such as INTC which closed at 41
9/16, just above converging 36-39 RT levels. I
wanted to alert you to the facts, because surfing the financial channels this
weekend, I heard the same portfolio strategist tell us that everything is
bullish, no problems, and he did the same thing two to three days before the
crash in 1987. The stocks don’t lie, because they can only go up, sideways, or
down and direction and volume are easy to recognize. Stay focused and don’t
listen to the empty suits.
face=”arial, helvetica”>(December Futures) | ||
Fair | size=2>Buy | size=2>Sell |
17.80 | 19.00 | 16.65 |
Pattern
Setups
Friday action left us without any real
buying pressure setups, but I see that the futures are up over 6 points, so
maybe we will get some new reinvested money into some of these decimated
sectors. Focus on the semis on the intraday charts for setups. The SMH has
yet to close above the high of a low day, but it is at a key Fib. RT alert
level, so pay attention. If we head south, look to short some of the chosen
stocks like
(
AMCC |
Quote |
Chart |
News |
PowerRating),
(
JNPR |
Quote |
Chart |
News |
PowerRating),
(
BRCM |
Quote |
Chart |
News |
PowerRating) and
(
NTAP |
Quote |
Chart |
News |
PowerRating) below Friday’s lows.
The only sector where I see above the
midpoint closes in more than one member is the brokerages.
If they come for them today look for continuation entries in
(
LEH |
Quote |
Chart |
News |
PowerRating),
(
MWD |
Quote |
Chart |
News |
PowerRating),
(
MER |
Quote |
Chart |
News |
PowerRating) and
(
GS |
Quote |
Chart |
News |
PowerRating). Outside the brokerage stocks, I would work the intraday charts in the
momentum stocks that I have continued to mention every day, provided the futures
hold. Keep tight stops and take early profits on part of your positions.
Have a good trading day.
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