Fundamentals mean nothing. The charts have broken down across the board, including many that Monday morning we outlined as over the 20 and 50 day moving averages - the "best of the best".
Now these stocks need to be treated like financials - you buy them when they are puked up, and then you have to sell them as they approach resistance. It is sad to see stocks with the better situation treated like this but this is whole sale destruction that makes little sense EVEN IF the world goes into a recession. Trust me, US retailers, airlines, financials et al won't be thriving in a global recession either - this is just an excuse to pummel stocks. But now all the sectors are identical to me - if financials get puked up, you buy and sell at resistance, if global growth story gets puked up, you buy and sell at resistance. They are all the same stock to this market as fundamentals are for old foggies over the age of 45. This is the Nintendo generation and charts are all that matters. Every stock we own is being treated the same - beat estimates and raise guidance? Sell off by 30% within a week. Miss estimates? Sell off by 30% within a week. So what's the difference. I am suspending all fundamental talk from blog until we return to an era where it matters. All that matters is chart and sentiment. ISM shows a HUGE improvement - woo hoo , the economy is contracting less than last month - that's GREAT! Even though 97,000 other measures show the economy degrading or flat at best. But that does not matter - there are banks and retailers we need to buy as the US consumer salivates for new shoes and checking accounts as they can now afford to actually get to the mall (nevermind those credit card bills or heating bills this winter or heck that grocery bill - America is flush with cash again!)
I am making the following purchases - I'll update detail later
- Potash (POT)
- CF Industries (CF)
- Mosaic (MOS)
- A-Power Generation Systems (APWR)
- Foster Wheeler (FWLT) <--- earnings after the bell
- Jacobs Engineering (JEC)
- Fluor (FLR)
- Flowserve (FLS)
- Alpha Natural Resources (ANR)
- Massey Energy (MEE)
- Walter Industries (WLT)
Again these are now broken charts in most cases - some are holding at or around the 200 day moving average. If/when they bounce they'll be sold as they approach the 50 day moving average. That might be wrong or correct to do. But we have to assume after an oversold bounce they will fail as the hedge funds have abandonded them. And their buying power is all that matters in this new and improved era of markets.
Whatever the "flavor of the day" reason is irrelevent - these stocks are being puked out and they will make up any number of reasons to explain it, most of which are just paper tigers. I can at least understand the commodity stocks but to destroy the global infrastructure plays because oil drops to $120 or is dropping to $100-$110 is plain ridiculous. If we have another day like this tomorrow I'll be buying another batch of them all. Valuation did not just drop 30-40% across the board in a week or less, just supercomputers algorithims.
We're either going to enjoy a bounce soon or be down 10% for the week. I guess even when the global recession hits and these stocks earnings fall by 10-15% from current targets (oh wait, Flowserve just increased their EPS by $1.25 - doesn't fit my hedge fund computer model - does not compute Will Robinson - does not compute) -- as I was saying even as these stocks earnings fall by 10-15% from current targets some will now trade at single digit forward PE ratios for 30,40,50,60,70,80%+ growth. But nevermind that - $3.25 gas is going to bring back the US consumer, while the Chinese economy goes down into flames. We have the perfect econony - stable housing, a strong consumer, a thriving trade surplus, and consumerism - which is 70% of the economy - is booming. So better to buy American than all those silly areas with funny names. Thanks Will Robinson. Over and out.
Yours in Rambling.
Long all names mentioned in fund; long Mosaic, A-Power Generation Systems in personal account
10 comments:
The short just does not want to let go DUG & SMN... amazing ..
i agree, the global names are beaten down. spx corporation, beat and raised guidance,,,it fell from 133 to 112..ridiculous.
I like how APWR had >20% swing from low to high today... Even more happy that I didn't have a chance to add under $20 as I was hoping.
That was a pretty stunning reversal by APWR in the last hour. Was there news?
mark, hang in there, buddy. it's just your hard work getting wrecked for no good reason.
Dr. Dave
All these names are still supported by 50 MA on weekly charts except FWLT&JEC. So most of them still have hope. FWLT and JEC are just pathetic.
I appreciate your cynicism. It seems that if there is X% of fundamantal movement in any stock over the course of a year, there is 20X% movement on a daily basis to get the end result. And, the computers are playing this harder than ever.
I suspect some of the big money has so much power they know they can get the ball rolling just by trading large, and then the chart gets a life of its own.
It's a tough game with no easy answers. As a trading friend likes to say, "Conviction can get you killed." On the other hand, trying to stay one step ahead of the momo, trading programs is very tough too.
Why buy a commodity when across the board they are suffering the same fate as anything when its over heated? Everything is at risk right now, there are no fundamental plays. We are shaking from the bottom up and the safety of commodity isn't real. I sympathize but you are trying to map out rules based on educated business concepts that tell you the pond is full of white swans when in fact its full of black swans right now.
Mark,
Take a look at the longer term charts of POT and MOS and other fertilizers, not to mention some of the other "bubble" commodity stocks...
If the earnings don't matter can you imagine how enticing shorting these charts may be. We could see POT go down to 120 or 130 here. Yesterday I predicted a bounce off of the 50 SMAs in MOS and POT... we did get a small bounce.. if they follow the charts of BTU, CHK, EOG, ACI, and many other beat earnings names we get a small bounce up and then we break below the 200 and watch out below.
Do what you think is right of course but it may not be wise to wait for a return to the 50... as soon as the bounce is over it may be time to get out... one test of the 200 and kablooie...
I am looking to do what all the bears that know nothing and or could care less about fundamentals are doing... look for the bounce to fizzle and then go short. Fighting them is like going against a swarm of locusts.
Agreed, fundamentals mean nothing....obviously with MER and others going up on horrible news. Stocks like POT had parabolic charts for awhile....reversion to the mean bro.
Post a Comment