Play It Close To The Vest
I will get to
my report in just a moment. I just wanted to let you know what
I wanted to come back as in my next life: the CEO of WorldCom.
There has
been a ton of chicanery, shenanigans, crime, irregularity, chutzpah,
hubris, lying, cheating and stealing on Wall Street lately. Those culpable are
hopefully going to get theirs. But there is one group of people that probably
are not in trouble. It is the board of directors at WorldCom
(
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PowerRating). You see, CEO Bernard Ebbers lost a heck of a lot of money in the
market in recent years. I guess when your stock goes from $61 to $8 in less than
three years, that could happen. Ebber’s biggest problem was that he made a huge
mistake by not joining TradingMarkets.com. Any one of the fine technicians at
this site would have pointed out for him how many times the stock broke down,
how many times the stock gapped down and how much volume accompanied the move.
We would have all pointed out that
every stock in the Telecommunications Services
group was looking like the south-end of a north-bound mule. Unfortunately, he is
a long-term holder. The reason why I want to be Mr. Ebbers is because he finally
figured out a way that he could never go underwater in the market. Man,
I have been looking for that Holy Grail since Day One. What did he do? He had the company loan him $339 million. Yes, I said $339
million to cover his poor investing discipline. I guess he didn’t have to worry
about putting in stops like the rest of us. Wow! I want to run WorldCom.Â
Now,
don’t think for a minute that there isn’t a punchline to this joke — or should
I say, another case of crappy corporate governance. What does Bernard Ebbers do
at the same time he is getting a $339 million loan? He decides that employees of
WorldCom should not receive any more free coffee. I said there was a punchline: While the company lends this man… let’s say it
again, $339 million … the company decides that employees need to pay for the
coffee. This move will save the
company $4 million. I would actually almost applaud the
move, if not for the ridiculous loan. I actually don’t know what to add. except to say that these people are
not living in the real world. They take away
from the masses and enrich one person. Is it no wonder this company is on the slide?
Back to our regular
programming. Â
About 2:40
p.m. on Friday, the market had enough of the downside. That’s all well
and good. After several straight days of nothing but ugly, the markets
decided to bounce somewhere. Of
course, it happened when everyone least expected
it — near the close — on a Friday.
It is not Friday’s action that counts as much
as Jan. 30’s action. That was the
day the major indices had a large volume reversal day. That type of day
tends to put in a low near-term.
Taking a look at the S&P 500
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$SPX.X |
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PowerRating),
the low of that day
was 1081. Last week’s action only undercut it by a few points…no
biggie.Â
The
Dow
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$INDU.X |
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PowerRating) never was retested with a low of 9529 on Jan
30. Friday’s low was
9580.Â
I am willing to call this decent short-term support for these two
major indices. Â
The
Nasdaq
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PowerRating) did undercut by a
wide margin — but that’s normal. The Nasdaq almost
always overshoots on both the upside and downside because of its higher
volatility. So what do we have here? So far, a bounce. How far? Don’t
know. How long? Don’t know. I do
know that a lot of previous leaders have been
shellacked. That tells me to play both sides
close to the vest as the shorts will bounce here but the longs are very
iffy.
The best-looking sectors are Aerospace/Defensive
(thank you, George W.) Air Freight, Defensive
Foods and Beverages, Homebuilding (but
too extended to buy here),
and Gold. Yes, I said
Gold. Some Gold stocks look like they have dot-com
after their names when dot-com was
hot. I don’t know how long they last. They have
had many fakeouts in the past. But … as of this
second, their charts are powerful
and look great on any pullback.