As we all know, Goldman Sachs (GS) rules the world, they just allow us to live in it - sort of like the Matrix. The company has broken through the 50 day moving average which it's been hovering around the past few weeks (sometimes above, sometimes below). The 200 day moving average is not far away in the low $190s and then from there, it is off to the races.
If... I need to stress IF... we can hold this 1260-1275 on the S&P 500 and we are able to have our correction sector by sector (the last piece of it), this may mark a (shorter term) turning point. Or it could simply be the Kool Aid talking. We've talked about the playbook that has played out time after time in our series of corrections since last summer - first goes the junk (financials, retailers, housing), then goes the middle of the pack stuff (technology, solar, some industrials), all the while the generals of the market at that time (usually some portion of the commodity sector) holds out... then as everyone rushes into that 1 subsector as a safe haven, as the rest of the market crumbles... we get that rotation - and the junk begins to ascend from the ashes, and the best of breed commodities gets hit. This "seems" to be where we are now - coal finally was beaten with the ugly stick today and fertilizer was taken down to their 50 day moving averages yesterday. All that remains is natural gas. Ultrashort Basic Material (SMN) after hammering us for weeks on end, finally acted as a proper insurance, increasing by as much as 10% today.
Not every correction is identical - but this one has thus far been eerily similar to November 2007 - no huge spike in VIX - just erosion day after day after day. The generals have not been slashed to pieces like they were in August 2007, January 2008 and March 2008, but it's been much more similar to the November 2007 era (so far) I still would like to see natural gas stocks bludgeoned to feel safe(r), along with another week or so of commodity weakness. But I'm playing the playbook and saying the rotation continues for now. Even though we are taking some tough losses this week (we were WAY overdue), it is far better than what we endured the last few times we had this rotational correction since we have some benefit from the small end of our barbell this time around (non global growth stories). However, this might just be scene 1 of the final Act so too early to call any victories.
Again my general thought process is some sort of oversold bounce here - maybe 3 to 5%ish, and then a potential return to retest the levels we just bounced off of. If we cannot even perform any bounce off a 10% down month, that would be incredibly troubling. 8:30 AM tomorrow will hold our near term fate. Red or Black? Who said this is not just a big casino?
Long Goldman Sachs, Ultra Financial, Ultrashort Basic Materials in fund; long Ultra Financial, Ultrashort Basic Materials in personal account
8 comments:
I agree on the sector by sector rotating bottom. Very much like Nov, the way the VIX is acting.
But in this type of bottom, I dont think we go screaming higher. It's going to be a sector by sector rotation, grinding up too.
I also went with some clf, mee, aci. But I think there is more downside to come.
I agree
When I am "completely bullish" on a name I'll be up to 4-7% stake. I don't have anything above 3% at this time. Most is still in the 1.5-2% range. Just scaling the lower we go.
A lot of coal newbies should be panicking right about now ;)
Who new nat gas would be the ultimate survivor - better than coal or fertilizer. Go Cramer.
I know. I totally didnt buy the natgas argument. Natgas is the last man standing.
But today is a mess. I havent seen an isolated sector sell off so hard before, without a broad market panic at the same time. Some of these coal names are off nearly 20%! O_O'
SMN is up 12.5%! I havent been around THAT long, but this is definately a new one for me.
I bought a 7% exposure today (with my existing SMN and DUG hedges). But I've been known to go up to 50% when I'm totally bullish.
I think this is one of those times to pull out the technicals to look for a bottom.
To me its 1260 or bust. Yesterday was a crazy day and today is turning out a terrible follow up. After a reversal like we had yesterday we should of had a nice day today. Not a good sing. Maybe unemployment rate drops to 4.8% tomorrow? ;) hah.
SMN has pummeled me for weeks so finally doing something - I wish I still had my 4% stake, would of been nice.
Extraordinary moves in coal but these stocks are up 100% in 3 months in some cases - and a lot of "new money" that doesnt know what they are buying is in them. Solar is actually far worse :)
SMN - the same with me. But its the exact opposite today. The coal trade REALLY did get crowded.
I think this might murder the dry bulk shippers tomorrow... Its the ags and coal - both shipped that way, that is really hurting the sector. Oil and gas stocks are 'relatively' unphased. Oil is up. But I think that's more risk premium on Iran.
DRYSHIPS is back to getting taken out daily.
jeff, right on. i fully expect shippers like DSX to get it handed to them soon.
Well COAL is crowded but soo darn cheap still.
Mark did you see why coal stocks are down 20% today. Because steam coal retraced 50% of a move from 170 to 220 in the last week and now pulled back to 200. ;)
That is hilarious.
I don't know why ANR was down, I know you like that one the best. I mean they're hedged for steam coal through 2009 (unfortunately) so price fluctuations don't affect the.
Thanks for the heads up on the correction.
I am readying to buy on the way down well into low 70s.
You think these could correct 50% total??
I think 30% is enough to shake out fools.
Post a Comment