The Barf Boat

  • November 25, 2002
  • Peter Navarro

Market
Trend: Short Run Up — Still in a Bear Market

Market
Outlook: Pullback Interruptus 

Macroplay of the Week: Short the Barf Boat
(
CCL |
Quote |
Chart |
News |
PowerRating)


The Broad Market Outlook: Due for A Pullback?


If you have been making money on this latest rally,
it probably doesn’t matter to you whether the rally is simply a short-term
technical stop along a continuing Bearish way or a true trend change, based on
the fundamental presumption that the economy is indeed recovering. 


It should matter, however, in the coming
week or two, because this rally should reveal its
true
character.  It will
do so in the nature and force of what must be a pullback from the seven-week run. 


We will watch the resiliency of the market
once the pullback hits and ride the short side until the market bucks us off. 
If it bucks hard, the pullback will become a “buying opportunity.”  If the
“buck” is more of a “whimper,” we will remain net short.  


The Week’s Macro Data Market Movers:

The
Macroeconomic Calendar


DAY


EVENT

Monday

  • Existing home sales


Tuesday

  • GDP

  • New home sales

  • Consumer confidence


Wednesday

  • Beige Book

  • Chicago PMI

  • Durable Goods

  • Jobless claims

  • Personal Income

  • Consumer sentiment

* Potential major market movers in red

This will be a very important week on the macro data
front! Look for any market pullback to be either triggered or aborted by
unexpected bad or good news on GDP, consumer confidence/sentiment, the Chicago PMI, and Durable Goods.

We don’t expect any upside surprises in new or existing
home sales — and see the market as flattening or falling. 
BUT, we do expect an
upside surprise on the consumer numbers — perhaps artificially depressed in
previous periods by war and snipers.

Our pick of the week for biggest market mover will be GDP. 
If this current rally really IS picking up recovery signals, look for the GDP to
beat estimates.  If so, any pullback could be very mild — if at all.



Macroplay of the Week:

The Barf Boat — Short

Carnival
(
CCL |
Quote |
Chart |
News |
PowerRating)


It seemed like an isolated event to the casual reader when a Holland
America cruise ship got hit by the Norwalk virus, causing its passengers to
spend most of their jaunt leaning over the side of the ship — or quarantined in
their cabins — rather than cavorting around the buffets and pool. It got
even worse when they didn’t properly clean the ship and then sent it out again
on the high seas with the same low result.


The resultant publicity was bad. Now, however, it has gotten worse as the
virus has spread to a Disney ship. Inquiring minds in the media are now
discovering that this virus problem isn’t particularly new and that cruise ships
are particularly vulnerable. 


The bad press the industry is getting should be enough to put a dent in what
has been very strong demand.  Plus Carnival is offering steep discounts to get
people quite literally back on board so that cannot augur well for earnings.


Finally, let’s not rule out the possibility that these virus infestations
are NOT happening by accident. I really
don’t
want to get
alarmist here
but in a modern world of crazed snipers and vengeful terrorists, the FBI would
be absolutely nuts if it didn’t at least look into the sources of this problem,
particularly since we are observing it across two different cruise ships sailing
from two different ports.


That all said, I come to the conclusion that shorting
Carnival

(
CCL |
Quote |
Chart |
News |
PowerRating), which
owns Holland America, might be an interesting, albeit somewhat macabre, macroplay. Be careful, however, the industry sector has been quite strong and
at least technically, Carnival and its chief rival
Royal Caribbean
(
RCL |
Quote |
Chart |
News |
PowerRating) still look OK. (A less risky way to play this would be as a “paired: trade: Short CCL and go long RCL.)


Check out the six-month chart. It’s a cyclical industry enjoying the
upswing. But note the gap down in the last week as the barf news hit — but then
a recovery. But this was before the latest Disney news. Note, too, that
momentum is fading.


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