Teutonic Efficiency
Market Trend:
Late Bear (Finally) Turning to Early Bull
Market Outlook: Cautiously BullishÂ
Peter’s Picks: Hedged Teutonic
EfficiencyÂ
Media Watch: Dunk the donut
(
KKD |
Quote |
Chart |
News |
PowerRating)? Lady
Doherty Meets the King    Â
The Broad Market
Outlook: Due for A Pullback
“Wal-Mart Stores Inc., the world’s biggest retailer, Saturday
reported record one-day sales for the day after Thanksgiving, and one poll found
sales at all retailers are up more than 12% over last year.”
— Reuters
It was about
this time last year that it
looked like the economy was finally on its way to recovery, as the stock market
was making the turn from Late Bear to Early Bull. By March, it had all gone to
pieces under the weight of war jitters, oil price shocks, and a bad dose of
corporate no-confidence.
Now we are trying this scenario again
and so far, so good. Quite legitimate fears of a double-dip
recession have now receded — replaced by speculation over whether GDP growth
will be 1%-2% or a more robust 3-ish%.
The big thing standing in the Bulls’ way
is uncertainty over the Iraqi situation. And of course, our nascent optimistic
sentiment could turn in a nanosecond with another lethal terrorist attack. In
the meantime, the biggest thing investors really have to worry about is jumping
into the market just before a pullback and getting singed.Â
And yes, there will be several pullbacks.
But what is most amazing about this latest rally is that the macro news remains
non-stellar, the stock market is not particularly under-valued, and a lot of
stocks are now flashing over-bought conditions. So what’s an investor to do?
In upward trending markets, the Savvy Macrowave Investor prefers to go long strong stocks in strong sectors. In
downward trending markets, we do just the opposite — short weak stocks in weak
sectors. In THIS market, which still is characterized by faith as much as solid
fundamentals, we consider a hedged position, albeit tilted towards net long,
BUT
which is also heavily salted with weak stock/weak sector shorts.
Remember, once a new Bull market arrives,
it will last for many months — not just weeks. That will be the time to be
totally long. But the time has yet to arrive.
Last take: With retail sales looking very
robust last Black Friday, look for the Bulls to bust out of the gate on Monday.Â
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The Week’s Macro Data Market Movers:
The Macroeconomic Calendar
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Monday |
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* Potential major
market movers in red
The ISM will likely show an upside
surprise and rise above consensus estimates on Monday. BUT, this doesn’t
necessary mean the supply side of the economy is in dandy shape. It may just be
a little over-exuberant inventory-building. Look for the market to rally on
this surprise along with what looks to be robust retail sales.
The other big report of the week is
Friday’s Jobs Extravaganza. It would be nice to see the dip in weekly jobless
claims start to show up in a similar dip in the unemployment rate. The
consensus has the rate ticking up instead. Our gut says no. Therefore,
speculate on the long side of this report.
Macroplay of the Week: Teutonic
Efficiency for the Wireless Sector
I’ve
tried ’em all: AT&T, Cingular, Nextel, Sprint. Yada, Yada. They all wretched
in some way or another — reckless juggernauts trying to stitch together
incomplete networks, all. Now comes Deutsche Telekom’s T-Mobile to really
challenge the market with its teutonic efficiency. Rumor has it that its
network is just simply more complete than the rest.
The other
thing I like about this stock is its hedging strategy. The big bet in cellular
has been the spread of Internet and e-mail applications to one’s cell phone. I’ve always thought that was garbage unless you were a munchkin with little tiny
fingers for little tiny keyboards.
As it is
turning out, however, “wi-fi†is giving the cell-phone geeks a run for their
connectivity money. And Deutsche Telekom
(
DT |
Quote |
Chart |
News |
PowerRating) seems to be hedging its Wi-Fi bets. Here’s the chart. Technicals look very good. Fundamentals are pretty good.
Media Watch: Dunk the Donut
It’s
pretty clear that Barron’s Jacqueline Doherty does not sip from the technical
analysts’ well.  For if she did, she wouldn’t have cast short-selling
dispersions on King Donut, aka Krispy Kreme. That because virtually every
technical indicator is bullish for the King — from the MACD and OBV to the
stochastics and Bollinger Bands. We will keep an eye on this one to see whether
Lady Doherty gets Kremed by the Donut — or gets crowned the new stock-picking
Queen.
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