Keep An Eye On These 2 Stocks For Shorting Opportunities
Market Trend: War Rally Pullback
Market
Outlook: Bearish
Macroplay of the Week: Longest Running Bubble in History
The Broad Market Outlook: A Long Difficult Road
Weekend events have underscored
President Bush’s warning that there may remain a long and difficult war ahead.
It’s one thing to race to Baghdad. It may be quite another to take the city.
A big concern — from the Pentagon to Wall
Street — is that the massing of US troops around the city will make it
easier to Saddam and his henchmen to launch a chemical or biological weapon
attack.
A big concern — from the White House to Wall Street — is that mounting US casualties and the disgusting
public display of such by the Iraqi-Al Jazeera propaganda mill will strengthen
the anti-war movement.
There is no doubt how the war will
ultimately end. But until the inevitable surrender, it is likely that the
explosive war rally on Wall Street will be put on hold — and likely go into
reverse.
The big question for the markets
will be: After Iraq, will the new Pax Americana in the Middle East and $15 a
barrel oil be enough to motivate new business investment and revive flagging
consumers — assuming consumers have enough cash left to spend? Will
tensions between the US and Europe lead to falling exports and a weaker dollar? Will
the “CNN effect†of million of Americans staying out of the malls and glued to
their TV sets be offset with a surge of spending after the war is concluded? Will productivity plunge as we devote more and more resources to protection
rather than production?
The bottom line: We can see a
clear path to a robust economy and new bull market, but it is an extremely narrow
and winding one that will be difficult to traverse. Until such time as we are a
lot further down that road, we see at best another bear market rally
a la
post-9/11 and October of 2002 and a longer term retest of the October 2002 lows.
public display of such by the Iraqi-Al Jazeera propaganda mill will strengthen
the anti-war movement.
ultimately end. But until the inevitable surrender, it is likely that the
explosive war rally on Wall Street will be put on hold — and likely go into
reverse.
will be: After Iraq, will the new Pax Americana in the Middle East and $15 a
barrel oil be enough to motivate new business investment and revive flagging
consumers — assuming consumers have enough cash left to spend? Will
tensions between the US and Europe lead to falling exports and a weaker dollar? Will
the “CNN effect†of million of Americans staying out of the malls and glued to
their TV sets be offset with a surge of spending after the war is concluded? Will productivity plunge as we devote more and more resources to protection
rather than production?
clear path to a robust economy and new bull market, but it is an extremely narrow
and winding one that will be difficult to traverse. Until such time as we are a
lot further down that road, we see at best another bear market rally
The Week’s Macro Data Market Movers:
The
Macroeconomic Calendar
|
|
|
|
Monday |
|
|
|
|
|
|
|
|
|
|
|
|
|
* Potential major market movers in red
War news will continue to dominate
the markets but there are some interesting reports coming out. The new and
existing home sales data will be viewed with particular interest. Any negative
surprise could put a nail in the housing stocks, which have been on a tear.
Â
Dismalscience.com releases its
“risk of recession†indicator which trended upward last month but remains a less
than 50-50 proposition. It would be surprising if this indicator didn’t inch up
a bit more and is one that is well worth watching.
GDP got revised upward last month
on inventory data. You have to sell that inventory to sustain the growth,
however, and with the consumer now firmly a casualty of war, falling demand has
to at some point be mirrored in falling supply.
Personal income, which is normally
of little interest, will be of note this week to see not how much folks are
earning but rather how much more they are saving — and not spending on aggregate
demand.
Up —
The broad markets.
Down — Even the weakest sectors are currently
rising on the overall market strength.     Â
Macroplay of the Week:
The Longest Running Bubble in History
Centex
(
CTX |
Quote |
Chart |
News |
PowerRating),
Ryland
(
RYL |
Quote |
Chart |
News |
PowerRating),
Beazer
(
BZH |
Quote |
Chart |
News |
PowerRating),
Pulte
(
PHM |
Quote |
Chart |
News |
PowerRating), Toll Brothers
(
TOL |
Quote |
Chart |
News |
PowerRating) et al
all took a big bounce back from bad housing data and some (Centex and Pulte) are
moving towards their 52-week highs. Any successful breakouts above these highs
would be truly remarkable so keep an eye on these stocks for shorting
opportunities. Note on the chart how the sector moves in lockstep. Note also
how the recent bounce has been on moderate volume — a clear sign of some short
covering.
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.  Â