We need 8-12% daily down drafts in oil stocks, coal stocks, natural gas, and fertilizers. (the "generals")
We need people to throw in the towel and not to feel like they are safe in any spot.
We need people chasing small cap oil stocks like Pyramid Oil (PDO) 120% up in 5 days (up nearly 1500% in 2 months), to run for the hills and not feel like this market is so easy.
That is the last stage I've been waiting for. When there is no place to hide. Every other stage has played out to perfection. We are now in the 2nd to last stage where people are hiding out in the last group standing (commodities) and they feel as if they are on top of the world as the rest of the market crumbles around them.
The last stage is when these hopes of that set of people are erased and they begin to experience similar pullbacks as everyone else has felt. As I wrote in this week's roundup - we could be coming to this time shortly. Let's see if we get some of those moves ...
I remain patient waiting for this moment. Then we can be confidant it's time to start layering in some purchases.
9 comments:
then what?? Load up??
Yawn. You've been begging for a commodity selloff daily for the last month. The market doesnt listen to prayers.
The forward P/E on the oil producers is still lower than the forward P/E on other sectors.
The P/E on the miners is way lower.
Coal and fertilizers have a higher P/E but it can be easily justified.
Whats the alternative anyway for all the investment money out there? Bonds with 3% yield? Real Estate? Bank of America? ROFL!
gold,
I'll be switching from shortish to longish the lower we go
shax, begging? I see. Somehow I've capitalized on the commodity run up.
For the long run would I buy financials? nah. But we've seen episodes of disassociation where the bad groups go up, and the good groups go down. If patterns repeats we will have another one in store.
If you believe oil will hit $155 before $125, its best to stay the course. To me, oil has been stuck for a month in $130s...
I'll be back in a heavier exposure once they correct.
DRYS has a forward PE of 5, TSL has forward PE of 10ish so PE doesnt really mean much to a market trading on emotion.
One more thing
Remember we have 4 quality companies reporting tomorrow and the Fed
This market is grasping at straws for anything positive and is down closing in on 7% straight in 3 weeks. Hence a reflex bounce would be logical.
Just a lot of cross winds and the intermediate term is still down. But I can see shorts lightening up before Fed because people act is if anything they say is magic.
Nothing straight down (or up)
Mark,
Are you apt to cut back on your commodity exposure in anticipation of this move; wait until the correction then cut; or wait until the correction and hold? I'm in POT and MOS and am anticipating the same as you, although I believe in the fundamentals of these companies.
BD
This "is" cut back for me.
When I'm really long I take some of these positions to 4-7% stakes. I won't go to 0.5% or something because these things go much further than I ever anticipate.
So essentially I'm willing to take the hit on what I have left in anticipation of better prices to add more to the stakes. But just because I think they will fall back doesn't mean it will happen, hence I have at least some skin in the game.
However, I have not seen a set of stocks so far away from 50 day moving averages, not correct - in a long time.
Mark,
Do you anticipate bouncing off the March lows (as getting to them now seem inevitable) or knifing through them?
Seems that demand for equities will continue to detoriate if worldwide inflation story has legs.
Stephen, it might sound counterintuitive for all I write but I try not to get into stock market prediction business. I have no idea how 10,000 hedge fund computers who run 70% of this era's trading will react. I have no access to their algrorithims and models. We are just gnats on an elephants behind.
I do believe its better to just react when we get to those stages - if the market does A, we will react this way... if the market does B, we will react the other way.
I speak a lot about the real economy but the market many times could care less - as long as there is a thesis in the market, they will trade en masse on that thesis until its proven right or wrong. So we just try to follow along in the near term and be cognizant that many times the market is wrong over the intermediate term (but always correct in the long term).
I am just adjusting on the fly frankly as each day's data set comes in, and the market mood changes.
I do believe that if the oil bulls have their way and crude is going to $150+ that cannot be a good thing for equities. Others may disagree. So its hard to have your cake and eat it to unless one believes with a market tanking 20% at oil $160, a small select group of energy stocks will not sell off - but this is part of the current thinking. I disagree with it but until (when/if) we get to oil $150+ we won't be able to test that thesis.
Making long term predictions in the market is akin to flipping a coin to me. Just going off short term indicators on charts and common sense macro views for the long term. Everything in between is complete guesswork.
Thanks, Mark.
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