Just The Plain Facts
Here are some of the lines you
have been hearing over the past couple of
years:
“Don’t worry, everything is OK. The market will come
back.”
“The Fed just lowered rates for the first time. Just
buy with both hands. Whenever the Fed is on your side, the market goes up.”
The FED first lowered rates on
Jan. 3, 2000. I need not rehash what the markets have done since.
“As soon as the economy kicks into
gear, the market will be right behind.” Uh,
the economy is better…
” The market has been down the past two years. It has
to be up this year.”
“The market is undervalued here. Our target is 1300
for the S&P 500 by year-end.”
If you know me by now, you know what I think of this type
of talk. It’s nonsense. Opinion
is just that…opinion. My favorite line is that I don’t even
know what I am having for dinner
tonight…so how can I predict the markets going out many months?
The bottom line is that I…nor they…can’t.
So, instead of opinion, let’s talk facts and only facts.
The S&P 500 is down 7.1% this year and is down 17.1%
from its 52-week high. To make matters worse, it is down 31.3% from its all-time
highs, and listen to this…it
is sitting right where it did in March of 1998…over four years with
no progress. This is probably the benchmark
most investment advisors follow the
most. Some roaring bull market.
The Nasdaq is down 17.2% this year and down 28.7% from its
52-week high. It is down a
whopping 68.5% from its all-time high. This is not a typo. The Nasdaq
100 is even worse off than the Nasdaq.
Once again, these are facts and not opinions. I believe
analysts’ and strategists’
opinions are about as good as the Psychic Friends’ Network…and they
filed for bankruptcy. I don’t say this sarcastically. I say this seriously.
I have actually heard some bullish strategists still calling this a
correction. As far as the analyst front, most have been found out. These
are all very smart people…in fact, a lot
smarter than I am. But writing a report
and reading a financial statement have nothing to do with the management
of money. Just look at some of the downgrades after 99% drops by some
well-paid, very famous analysts.
This is why I am a technician first. It drowns out all the
noise and all the opinions. I
believe the market will always be the final arbiter. If you try to
be smarter than the market, you will be run over. Just remember, the
market doesn’t care about what you or I
think…and hope and prayer are never listened
to.
As of this second, I believe risk management is key. The
markets remain very tough to
invest in. I can’t begin to tell you how many failed rallies there
have been. For sure, there have been
pockets…especially in small-cap value areas.
I just don’t think value can last very long.
Technically, the Nasdaq is the weakest of
the major indices and should basically
be avoided. It continues to amaze me how many important names of the
past bull market are in single digits and how many have been totally
destroyed. Near-term, the Nasdaq is acting
ominously. A break below 1560 will only
make matters worse, as it will then have its sights on the September
lows.
The S&P 500 is the next in line as far as weakness.
One can argue that if you look
at a longer-term chart, you can see one big, giant broadening top. A
break below 1050 will be very negative. You
can draw a line going back to Oct.
3, 2001, to see just how important this support could be.
The Dow is acting the best, but carries
hardly any weight with me. The Dow is made
up of just 30 stocks…and many leaders of the past that will probably never
lead again.
Some other near-term negatives I am watching are:
The complete inability for the market to get a head of
steam. Every rally seems to get
hit with a bigger bout of selling. Friday’s late-day reversal gives
me pause.
A bunch of stocks and sectors that have broken their
50-day average.
Sentiment that remains too bullish. Amazingly, with all
the major drops, bullish
advisors remain at a worrisome reading of 53%. This is a contrarian
indicator.
Insider buying is nonexistent. The people who run the
public companies are finding no
value in their stock prices.
The DOLLAR’s chart is one big
top.
GOLD is on the move. Extended
near-term but on the move. The DOLLAR down and GOLD
up is a very negative forecaster of things to come.
I didn’t leave you with much today, but facts are facts.
You know where I have stood many
a moon on the markets. I am as big of an optimist as anyone, but with
the market, I am a realist, and more importantly…a captive audience.
Until the market changes for the positive, I
keep my stance.
If you are looking for areas to exploit on the long side,
you can look at GOLD…on
pullbacks, HOSPITALS, HMOs,
REITs, misc. RETAIL, RESTAURANTS,
and TOBACCO.