Not A Short Story
Market Outlook:
Cautiously bullish
Sector’s Long:
Internet security, Chips
Sector’s Short:
None
Peter’s Picks:
Gaming Basket —
(
BYD |
Quote |
Chart |
News |
PowerRating),
(
IGT |
Quote |
Chart |
News |
PowerRating),
(
ISLE |
Quote |
Chart |
News |
PowerRating),
(
PENN |
Quote |
Chart |
News |
PowerRating)
The Broad Market Outlook: Bulls “R” Us
We note a very important
fundamental change in investor behavior. Over the past several months,
professional traders have been selling into rallies and thereby cutting every
rally short. Now, it appears that the prevailing strategy is to buy into the
dips — thereby propelling the markets up.
We do not see this change in
behavior as a necessarily rational response to what continues to be very weak
macroeconomic fundamentals. Instead, we believe there is a consensus forming
that many stocks have indeed reached bargain prices. Since it takes a long time
for bigger institutional investors to build positions, many of these investors
are now beginning to do so. Accordingly, our outlook is cautiously bullish.
Our bullishness notwithstanding,
we will, however, keep our eye on a number of potentially troublesome macrowaves. These range from war in Iraq and a recessionary spike in oil prices and a
collapse of the Venezuela government with similar consequences to any further
softness in consumer confidence or business investment.
behavior as a necessarily rational response to what continues to be very weak
macroeconomic fundamentals. Instead, we believe there is a consensus forming
that many stocks have indeed reached bargain prices. Since it takes a long time
for bigger institutional investors to build positions, many of these investors
are now beginning to do so. Accordingly, our outlook is cautiously bullish.
we will, however, keep our eye on a number of potentially troublesome macrowaves. These range from war in Iraq and a recessionary spike in oil prices and a
collapse of the Venezuela government with similar consequences to any further
softness in consumer confidence or business investment.
The Week’s Macro Data Market Movers: The Data That Didn’t Bark
Few weeks are as quiet as this one promises to be
on the data front. There is absolutely nothing on the calendar likely to move
the markets. With momentum now towards the upside, this, in turn, suggests a
week of either more solid basing or continued upward movement.
That said, let me warn you first about Monday’s release of the Index of Leading
Economic Indicators. Most pros understand that this is actually a lagging indicator because it is based mostly on data that has already been released separately. Still, the popular press — and
perhaps some of the handwringers on CNBC — are likely to make a big deal of what
should be a somewhat ugly report. Because of that, we may get a negative market
reaction.
In other news, more evidence of a burgeoning trade deficit on Tuesday could lead
to weakness in the dollar and a collateral flight of foreign capital out of the
stock market. Our bet is that this could be the big negative surprise of the
week — at least on the data front — so watch it carefully. (Tuesday will also
bring us news on the budget deficit, but this is a notoriously meaningless
report.)
The Macroeconomic Calendar
DAY
EVENT
Monday
·
Leading Indicators
Tuesday
·
Trade Report
·
Budget Report
Thursday
·
Jobless Claims
* Potential major market movers in red
Macroplay of the Week: The Games People Play
The gaming sector is hot as a
firecracker. My macrowave speculation goes as follows: In the wake of 9/11,
there has been a fundamental change in the psychology of the American people.
It’s a throwback, if you will, to the days of the “eat, drink, and be merry, for
tomorrow you die†Roman empire days. In the language of the economist, it means
that people now have a higher “discount rate†because they view life as much
more uncertain. One of the big beneficiaries of this change in psychology seems
to be the casinos. What’s all the more intriguing here is that even though
people are flying less, this doesn’t seem to have taken as much toll on the
casinos. In addition, the other macrowave driving this is the rapid expansion
of gaming through the Indian tribes which are able to circumvent much of the
state and federal restrictions on gaming.
At any rate, a gaming basket
consisting of
Boyd Gaming
(
BYD |
Quote |
Chart |
News |
PowerRating) (see chart
below), International Game
Technology
(
IGT |
Quote |
Chart |
News |
PowerRating), Isle of Capri Casinos
(
ISLE |
Quote |
Chart |
News |
PowerRating), and Penn National
(
PENN |
Quote |
Chart |
News |
PowerRating) seems
of interest. Note that of the four stocks, BYD and ISLE are flashing overbought
signals so watch your entry, while IGT is one stock where you can get in the
earliest on any further movement of the sector.
Note also
that all of these
stocks are nearing 52-week highs and that we could have one heck of a breakup —
or a total breakdown. So be on the lookout for any failed move and get out fast,
if need be.
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.
Economic Indicators. Most pros understand that this is actually a lagging indicator because it is based mostly on data that has already been released separately. Still, the popular press — and
perhaps some of the handwringers on CNBC — are likely to make a big deal of what
should be a somewhat ugly report. Because of that, we may get a negative market
reaction.
to weakness in the dollar and a collateral flight of foreign capital out of the
stock market. Our bet is that this could be the big negative surprise of the
week — at least on the data front — so watch it carefully. (Tuesday will also
bring us news on the budget deficit, but this is a notoriously meaningless
report.)
|
|
|
|
Monday |
· |
|
|
·
· |
|
|
· |
Macroplay of the Week: The Games People Play
The gaming sector is hot as a
firecracker. My macrowave speculation goes as follows: In the wake of 9/11,
there has been a fundamental change in the psychology of the American people.
It’s a throwback, if you will, to the days of the “eat, drink, and be merry, for
tomorrow you die†Roman empire days. In the language of the economist, it means
that people now have a higher “discount rate†because they view life as much
more uncertain. One of the big beneficiaries of this change in psychology seems
to be the casinos. What’s all the more intriguing here is that even though
people are flying less, this doesn’t seem to have taken as much toll on the
casinos. In addition, the other macrowave driving this is the rapid expansion
of gaming through the Indian tribes which are able to circumvent much of the
state and federal restrictions on gaming.
At any rate, a gaming basket
consisting of
(
BYD |
Quote |
Chart |
News |
PowerRating) (see chart
below), International Game
Technology
(
IGT |
Quote |
Chart |
News |
PowerRating), Isle of Capri Casinos
(
ISLE |
Quote |
Chart |
News |
PowerRating), and Penn National
(
PENN |
Quote |
Chart |
News |
PowerRating) seems
of interest. Note that of the four stocks, BYD and ISLE are flashing overbought
signals so watch your entry, while IGT is one stock where you can get in the
earliest on any further movement of the sector.
Note also
that all of thesestocks are nearing 52-week highs and that we could have one heck of a breakup —
or a total breakdown. So be on the lookout for any failed move and get out fast,
if need be.
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.