Random Thoughts
In a sign that the apocalypse is not here just yet ,
Robert Prechter is back. Amazingly, his new book “Conquer the Crash,” is at No.
1 on Amazon’s best-selling business books. In this book, he predicts the Dow to
go to 800. No, that was not 8000…800. He calls for a depression and
breathtaking deflation in asset prices…including homes that will drop on
average 50%. Mr. Prechter follows the Elliott Wave theory. I don’t think he
could do the wave at a football game.
Far be it for me to critique someone, so let me just lay out one important fact.
MR. PRECHTER HAS BEEN
PREDICTING ALL THIS SINCE 2500 ON THE DOW. I just find it so amazing that
the lemmings of this world will buy anything from anyone. This man is the poster
child for the cliché, “a broken clock is right twice a day”…and this clock is
Big Ben. I would love to see more of these doomsayers come out of the woodwork.
Please ignore and just let the market be your guide.
In case you did not know, I usually spend three hours on Sunday studying the
markets. My favorite tool is Daily Graphs’ printed products. They include
about 3000 stock charts of the so-called important names. I also spend some time
studying the charts of every sector in the market. Something unusual happened
this weekend. I went through the charts quicker than I ever have. Why?
Simple! Almost everything has broken down. In fact, I found fewer than 100
stocks that even resembled anything like a decent chart and found exactly zero
stocks to buy based on my breakout criteria. I went through two highlighters
crossing out all the ugly charts. This doesn’t mean that stocks can’t go up.
Bounces can occur at any time. It just means there is absolutely no leadership.
On the sector front, I found zero for the long side. I see a few that can push
higher…I see a few that can bounce…but once again…no leadership.
I am hearing too many technicians say that it is a good thing for the market
when the every stock has been killed. They say that this means we are closer to
the bottom. NO! It is not good for the market when everything is trashed. Please
be careful about these statements and just let the market dictate.
In case you do want to be long here, I would like to show you a few things. If
you don’t like horror movies, you may not want to look. I have always told you
that eventually, a bear market gets to all the leaders. Well, it is now
happening…and it is ugly.
They said that a falling dollar would help multinational consumer stocks. Take a
look at
(
KO |
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(
PEP |
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(
CLX |
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PowerRating). They were leaders.
They said you
must own mid-caps and small-caps. How about taking a look at the
(
MDY |
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the
(
IWM |
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Certain MEDICALS were leading. Not any more. How about a picture of
(
ABC |
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(
BEC |
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(
BAX |
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(
BDX |
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(
JNJ |
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PowerRating). All these names were at recent
yearly highs.
UTILITIES were leading. In fact, aren’t they supposed to be safe havens? Take a
gander at
(
FPL |
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PowerRating),
(
TXU |
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(
ETR |
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RESTAURANTS were leading. Eat the food but avoid the stocks right now. The
action in
(
OSI |
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(
RYAN |
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(
EAT |
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(
FO |
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weeks of gains in days. That was a new high three weeks ago.
DEFENSE were
supposed to keep leading. After all, we are at war.
(
GD |
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(
NOC |
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(
RTN |
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and others were just absolutely wacked in a matter of days.
AUTO PARTS were doing really well. In fact, they had been leading for quite some
time. Take a look at
(
AAP |
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PowerRating),
(
AZO |
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PowerRating) and
(
GPC |
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PowerRating).
Enough of that.
The fact is that most stocks have been swamped just like the ones just shown. It
is not a pretty sight. But it shouldn’t matter to you because as you have been
reading all of my reports, you have listened and stayed out of the way…right?
You own zero TECH, you are not on margin, you have lots of cash…making nothing
but not losing anything…right? You are studying for the next bull
market…right? You have your emotions in check…right?
In conclusion to this mess, nothing has changed. Markets remain oversold…but
oversold in a bear market is much different than oversold in a bull market. That
should be evident by now. A bounce can happen at any time but they are all
sellable. Believe it or not, the only decent relative strength I am seeing
near-term is in TELECOM and some
TECH. Did I actually say
that? Maybe it was because of Warren Buffett throwing some pocket
change at Level 3 Communications…I don’t know. I would just tell you if you
decide to wade in those waters…bring a big can of shark repellant.
I would love to talk about the major averages but don’t see a reason right now.
They are all below their respective 200-day averages and are looking and acting
like the future of baseball in Florida. World market averages are going along
for the ride. Don’t you just love positive reinforcement?