Wednesday, January 23, 2008

Another Day for Retailer and Homebuilders to Shine

Posted by TraderMark at 12:03 PM TweetThis
Amazing action right now. I suppose the thinking is the Fed cuts will lead people back to stores and buying homes. I disagree 100% but this is the only trade working right now. I'm not sure how this cut makes budgets any better or homes more affordable. Rates have been low for a while now and homes are still not moving. People were not shopping even with the last 3 cuts. But this is "the trade" and as I've mentioned in the past 70% of trading is now done by computers, and all the computer seem to be working on the same quant model.

Some financials are also ramping decently.

I do understand stocks are forward looking 6+ months but I just don't see this housing boom next fall or people flooding the shops even if rates go to 0%.

Obviously I don't own these sectors because these stocks will probably move for their 25-35% moves before rolling over again. But you can't be short them as I have been stating for the past 2 weeks, as they seemed to have bottomed out. But watching them take off without any other part of the market participating sure is fascinating. Even more fascinating (aside from the carnage in my holdings) is watching the "recession stocks" aka safety stocks also take a beating. While people run to homebuilders and retailers. Truly the strangest market I've seen in a long time.

Posted by TraderMark at 12:03 PM Comments (10) | Edit This Post | Create A New Post

10 comments:

hieunguy said...

Forget about this, you get a crash on your holding of top mo-mo stocks in front of your eyes. What are you going to do? assume this is a real fund, you will have an avalanche of fund withdraw this afternoon, what will be your decision? beside liquidify your position.

January 23, 2008 12:43 PM  
T-Rader said...

I want to say short covering but I heard Cramer on TV say that hedge funds are already gaming next years earnings for the retailers because of the cuts. I just don't get it sometimes.

So is this a tradable bottom yet? Its like crashing in slow motion. I was expecting a big wave of selling.

January 23, 2008 1:00 PM  
T-Rader said...

What a crappy tape, I can't even buy gold bullions.....

January 23, 2008 1:07 PM  
TraderMark said...

hieunguy, if I got panicked investors liquifying, I'd sell off positions that have held up the best - ironically financials like BLK and MA. :) Also keep in mind I have no "inflows" either during good times lol. So no outflows or inflows. Sort of a closed experiment. Hopefully they'd read the website first before panicking but I am sure some would. You might call them momo's but many of the stocks now selling off are 10-15x earnings. :) So below the market average. I still have a large gain in Mosaic and can draw that down as well, as with Potash. and CF. Thats about 12% of the portfolio right there.

I'd keep those hit the worst to be blunt as the levels some of these are trading - they now have been hit (from peak to trough) as badly as retail, and financials. Ironic.

January 23, 2008 1:30 PM  
TraderMark said...

t-radar I think what hieuguy is saying is what is happening on the street right now. Forced liquidations. We saw the same action in August at the worst of the dislocation. Some hedge funds are simply going out of business and others are forced to sell down at any price due to panicked investors. So selling begets selling.

I do find it ironic that the (ahem) 'good stuff' is now selling off as much as the 'bad stuff'. Meaning it really doesnt matter what sector or choices you made - everything sold off just about the same % (aside from homebuilders which have been in 2 year bear). From peak levels I have things now that have sold as on a % basis as badly as a Citibank or Merrill Lynch. Quite amazing.

January 23, 2008 1:33 PM  
hieunguy said...

Mark,

From a chart formation standpoint, all your holding exhibits, 3 drives to the top, or blow off top. (This is typical for all top / darling stocks, you said it yourself, a months or 2 ago, less and less quality sectors and too many people leaning on those stocks). Now we have a confirmed bear markets, these top names will suffer the most decline vs the wash out sector , like homebuilder or financial. The rebound on these names like Pot, fwlt, aapl... will be confined within the downtrend channel until long term support come in (swicth over to weekly charts). I am afraid that you will underperformed the index for a few more weeks, until the index itself find long term support. By holding on to these names, you still think bull market mode, which can be deadly. I am saying all this so people who visit your site, don't loose the fact that what you advocate for the last few months on the fundemental of the market itself is all come true.

January 23, 2008 1:48 PM  
T-Rader said...

I can see the redemptions. What I don't understand is the absolute lack of buying. I think I prefer the panic crash. Its gruesome but quick. This slow decent just stinks to watch. Theres no technical entries and it feels it could reverse anytime which keeps traders at bay.

January 23, 2008 1:49 PM  
TraderMark said...

hieunguy, you make a good point

I guess if we never bounce ever again or not for 3 more months there is no hope :)

I just cannot imagine the good guys out there like Heenber selling at 40% off prices from weeks ago in their favorite names. Maybe I am wrong. I'd like to lighten up, but on the "overdue rally".

I also just cannot get behind retailers and banks other than for a trade. i.e. 2-3 weeks. And I don't want 100% turnover in 2 weeks just to get into those names for 3 weeks.

January 23, 2008 2:03 PM  
hieunguy said...

exactly the same actions in 2001-2002, get use to it for the next 10 months. We only have a confirmed bear market last wednesday, and everybody looking for the retrace, it must be crazy. Don't look at the market, look at the Vix, it's not above 35 yet, what panics???

January 23, 2008 2:04 PM  
TraderMark said...

T-Radar, again - the silver lining is you can say you went through one of these times now, just like all the grizzlied folks from 2000-2002, 1998, 1990-1991, and 1987 can say.

hieunguy, give me your top 5 picks for the next 10 months. I'll take MOS @ $74 and let's see how they compare versus each other in 10 months, we'll us Thanksgiving as a good target date/ My asumption, backed by the portfolio weighting is it will outperform. I assume you mean you would pick at the washed out sectors so you can pick a homebuilder, financial, retailer, or restaurant or in fact any stock. And we'll check back to see how it worked out. I just can't turn down 40-50% growth for nearly 12 PE ratio, even if you think its just momo.

January 23, 2008 2:14 PM  

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