Free Newsletter: Stalking Stocks with the Shark - Bulls Build Further - 7/31/08
Greetings Shark Investors:
Despite an almost 4% rebound in oil prices and a rocky trading session, the major indices were able to move back towards recent highs on Wednesday following better than expected economic data and positive news from the financial sector. Indications were for a flat start to the day early in the morning as investors waited to see if stocks would be able to build on the previous day’s bullish session. However, both the index futures and the dollar moved sharply higher following the monthly ADP employment report which showed that the economy was able to create 9,000 new private sector jobs last month versus the expected decline of 60,000 economists had expected. While that number typically fails to accurately predict the jobs report from the Labor Department, such a wide divergence likely got traders thinking that we might be in store for a similar surprise on Friday.
As such, the market opened the day posting solid gains, but even though it was able to move further to the upside during the first hour of the day, news that a greater than expected drawdown in gasoline inventories reversed the early strength in the greenback and sent crude prices higher. While the energy sector rebounded strongly on that report, financials, industrials, tech, staples and consumer discretionary came off their early highs, and as a result, the averages began to lose steam, working their way back towards the flat line for the rest of the morning and into the New York lunch hour.
However, after bouncing around in mixed territory during the early part of the afternoon, news that MER, despite their massive write down and equity offering announcement Monday night, had decided not to cut their dividend triggered a broad-based turnaround about 110 minutes before the close. From that point on, just about every area of the market rallied straight into the bell to finish the day at highs on good volume and breadth that was about 3:2 to the positive.
Without a doubt, it was another strong day for the bulls. The averages have been able to recover from the sharp pullback at the end of last week and the beginning of this week to put in a higher low, but they are now sitting right at short-term lateral resistance. A higher high at this point may get the shorts nervous and the underinvested longs worried that they might miss out on another counter-trend move like we saw earlier this year. That said, we continue to be concerned that this market is clearly lacking any sort of leadership. While many hope that banks and brokers will be able to take on that role, the price at which MER sold their mortgage-related assets suggests that similar assets at other major financial institutions are holding on their books are still not properly valued.
Meanwhile, whatever strength there may be remains concentrated in the worst looking charts. A huge rebound in financials drove the first past of this bounce, and today, the attention has shifted to energy. The constant shifts from one area to another have left this market with very few decent chart set-ups, making it difficult to find opportunities to build more substantial positions. However, should this counter-trend move to be sustainable, then those set-ups will present themselves in time. All it takes is patience, and that’s one commodity we can never have enough of in a bear market.
About Me
- RevShark
- James ‘RevShark' DePorre is widely viewed as one of the nation's top educators of individual investors as well as a gifted stock market commentator. His daily comments help ten of thousands of market participants navigate the market seas. His self-taught methods are geared to help individual investors use their small size and flexibility to gain an edge over the huge institutions that dominate Wall Street. His unique approach isn't just theory. It has allowed him to grow a small stake into many millions. In 1999, Jim founded SharkInvesting.com which continues to operate today with many of its pioneering members. In October 2001, Jim became the featured diarist for RealMoney.com , the paid subscription site of TheStreet.com . Jim has also been featured in numerous publications, including Money Magazine , the Wall Street Journal Online , Fortune , New York Magazine , PC World, Online Investing Magazine , the Detroit Free Press , the San Francisco Chronicle, the Sarasota Herald-Tribune, Manatee Herald-Tribune and Bradenton Herald.
Thursday, July 31, 2008
Wednesday, July 30, 2008
Broad-Based Buying Boosts Market - Free Newsletter: Stalking Stocks with the Shark - 7/29/08
Broad-Based Buying Boosts Market - Free Newsletter: Stalking Stocks with the Shark - 7/29/08
Greetings Shark Investors:
Following the previous day’s drubbing, another pullback in oil, renewed strength in the U.S. dollar, strong earnings results, better than expected economic data and a positive response to news out of the financial sector all conspired to propel stocks higher on Tuesday. As we mentioned in our last Stalking Stocks newsletter, judging from the action on Monday, there is little doubt that somebody knew something regarding the planned announcement from MER after the bell that they would be conducting a fire sale of mortgage-related assets and raising additional common equity. However, as is often the case when those in the know have access to information the general public does not, we will often see a “buy the rumor, sell the news” scenario play out where traders go long ahead of ahead of an expected event and then sell once the news is out. It’s just that, in this case where the news was bad, there was likely a good deal of shorting the rumor and covering on the news.
Taken from that perspective, it is certainly understandable that indications were for a higher open to Tuesday’s trading session with sentiment getting a further boost on a blow-out quarter from steel-maker X and a sharp pullback for crude. As such, the market began the day to the upside but was unable to make much progress in the first thirty minutes. However, that all changed following the reading on July consumer confidence which, despite forecasts for a slight decline, actually showed an unexpected jump. Following that news, stocks shot sharply higher pretty much across the board, with financials, tech, industrials and consumer discretionary leading the way. Although the steep ascent slowed a bit after that, the averages continued to work their way higher as we worked our way into the afternoon.
While it was looking like we might finish out the day at what had, up to that point, been the highs of the day, another wave of buying hit in the final thirty minutes, sealing the deal on a very strong day for the bulls. Of course, the big question is to what degree can we trust this move. Certainly, there were several aspects to the action that are encouraging. The gains were broad-based and breadth was a very solid 11:4 to the positive. That said, it is impossible to tell how much of the huge 7.6% advance for the financials was a result of short-covering and rebound trading. While many pundits argued that the move by MER was likely a signal that financials are nearing an end to their massive asset write-downs, it’s hard not to wonder if instead it is just another sign that we lack any sort of real understanding of the problems that the housing and credit bubble created.
Regardless, we are faced with a market that is now in a position to put in a higher low, and given the dismal action, we have seen over the previous two months, there is a good chance that a move past short-term resistance levels will get those who aren’t positioned for strength right now nervous about being left behind. If buyers can build on this, and in particular, push the averages to fresh short-term highs, then we may start seeing investors get nervous about missing out on another move like we saw back in the March-May intermediate uptrend.
At the same time however, the one thing this market sorely needs – leadership – is still lacking. While many are hoping that the financials will assume that role, we suspect that there is more bad news in store for the sector, and outside of that, we have yet to see any group or area that might attract some real buying. The bottom line is that the sort of action we’ve seen recently really makes for an environment best suited to short-termers, but it certainly does not encourage more substantial position building. We’ll see if this turns into something more, but for right now, we need to take it for what it is – a counter-trend bounce – and avoid thinking that the worst is suddenly accounted for and priced into the market.
Greetings Shark Investors:
Following the previous day’s drubbing, another pullback in oil, renewed strength in the U.S. dollar, strong earnings results, better than expected economic data and a positive response to news out of the financial sector all conspired to propel stocks higher on Tuesday. As we mentioned in our last Stalking Stocks newsletter, judging from the action on Monday, there is little doubt that somebody knew something regarding the planned announcement from MER after the bell that they would be conducting a fire sale of mortgage-related assets and raising additional common equity. However, as is often the case when those in the know have access to information the general public does not, we will often see a “buy the rumor, sell the news” scenario play out where traders go long ahead of ahead of an expected event and then sell once the news is out. It’s just that, in this case where the news was bad, there was likely a good deal of shorting the rumor and covering on the news.
Taken from that perspective, it is certainly understandable that indications were for a higher open to Tuesday’s trading session with sentiment getting a further boost on a blow-out quarter from steel-maker X and a sharp pullback for crude. As such, the market began the day to the upside but was unable to make much progress in the first thirty minutes. However, that all changed following the reading on July consumer confidence which, despite forecasts for a slight decline, actually showed an unexpected jump. Following that news, stocks shot sharply higher pretty much across the board, with financials, tech, industrials and consumer discretionary leading the way. Although the steep ascent slowed a bit after that, the averages continued to work their way higher as we worked our way into the afternoon.
While it was looking like we might finish out the day at what had, up to that point, been the highs of the day, another wave of buying hit in the final thirty minutes, sealing the deal on a very strong day for the bulls. Of course, the big question is to what degree can we trust this move. Certainly, there were several aspects to the action that are encouraging. The gains were broad-based and breadth was a very solid 11:4 to the positive. That said, it is impossible to tell how much of the huge 7.6% advance for the financials was a result of short-covering and rebound trading. While many pundits argued that the move by MER was likely a signal that financials are nearing an end to their massive asset write-downs, it’s hard not to wonder if instead it is just another sign that we lack any sort of real understanding of the problems that the housing and credit bubble created.
Regardless, we are faced with a market that is now in a position to put in a higher low, and given the dismal action, we have seen over the previous two months, there is a good chance that a move past short-term resistance levels will get those who aren’t positioned for strength right now nervous about being left behind. If buyers can build on this, and in particular, push the averages to fresh short-term highs, then we may start seeing investors get nervous about missing out on another move like we saw back in the March-May intermediate uptrend.
At the same time however, the one thing this market sorely needs – leadership – is still lacking. While many are hoping that the financials will assume that role, we suspect that there is more bad news in store for the sector, and outside of that, we have yet to see any group or area that might attract some real buying. The bottom line is that the sort of action we’ve seen recently really makes for an environment best suited to short-termers, but it certainly does not encourage more substantial position building. We’ll see if this turns into something more, but for right now, we need to take it for what it is – a counter-trend bounce – and avoid thinking that the worst is suddenly accounted for and priced into the market.
Tuesday, July 29, 2008
Free Newsletter: Stalking Stocks with the Shark - Financials Lead The Market Lower - 7/28/08
Free Newsletter: Stalking Stocks with the Shark - Financials Lead The Market Lower - 7/28/08
Greetings Shark Investors:
It was another day of losses for the market as persistent concerns regarding the credit market and lack of leadership pushed stocks lower across the board during Monday's trading session. Indications were for a lower start to the day as news that the FDIC moved to seize two more regional banks late last week and comments from Minneapolis Fed President about how credit conditions would likely continue to deteriorate weighed on sentiment. Better than expected earnings results from VZ and KFT helped to improve things a bit ahead of the bell, but it was not enough to ensure a positive start to the day.
Even though the market did open the day modestly to the downside, buyers showed a bit of life in the early going, taking the averages back towards the flat-line. However, the trading turned out to be choppy in the early going, with financials and energy in particular experiencing a handful of sudden swings. Unfortunately, that action failed to allow the market to gain any traction to the upside, and as a result, the tenor of the trading turned decidedly negative about an hour into the day. As such, the averages trended steadily lower for the rest of the morning and into the New York lunch hour.
As we worked our way into the afternoon, the selling pressures abated somewhat as the market hovered near the lows of the session for the next couple of hours, but a fresh wave of selling kicked in, ensuring a close at the lows of the day with average losses for the indices of 2% on breadth that was 11:4 to the negative and volume that was on par with what we've been seeing on Mondays over the past few weeks. Certainly, it was an ugly day all around. Only one of the Dow stocks was able to eke out a gain, while utilities and energy were the only two sectors to finish in the green.
Most notable, however, was the losses in the financial sector. The XLF fell 4.31% on the day, while the financial stocks on the Dow were responsible for about a third of the points that index lost. While much of the commentary throughout the day pinned the weakness in the financials on vague concerns, there was plenty of talk regarding the 12% drop in shares of MER and the sharp increase in the number of open options contracts on "no new news." Of course, it wasn't a real big stretch to assume that "somebody knew something", nor was it much of a surprise to see MER issue a press release after the close announcing plans to raise $8.5 billion in new capital and, as the Wall Street Journal describes it, "lance the boil" on $30 billion in mortgage assets.
While this is may eventually be seen as the sort of bold step by a major broker to come clean in regards to the bad debt on their books, the news, as well as the action we saw between the bells, only goes to reinforce the notion that we continue to have little understanding about how far and how deep the problems resulting from the housing and credit bubble will reach. We'll see how this plays out, but it also should serve as a pointed reminder that we need to vigorously resist the temptation to trust any action to the upside in the midst of a primary downtrend – no matter how tantalizing it may seem.
Friday, July 25, 2008
Free Newsletter: Stalking Stocks with the Shark - No Place To Hide - 7/24/08
Free Newsletter: Stalking Stocks with the Shark - No Place To Hide - 7/24/08
Greetings Shark Investors:
After bouncing mightily over the past week, stocks pulled back en masse on Thursday as buyers refused to step up to the plate and provide support during a wave of profit-taking. It was another mixed morning of earnings news as MMM and F missed expectations by a wide margin, and AMZN beat estimates, while QCOM offered in-line results and announced that they had settled patent litigation with NOK. Meanwhile, weekly jobless claims showed an increase of 34,000 to 406,000, which was well ahead of the 8,000 increase economists had expected. While the data concerning the labor market over the past several months has yet to show the type of weakness typically associated with a major economic downturn, it is obvious that the job picture is deteriorating.
Although the market opened the day just south of the flat-line, sellers hit the open hard, sending the averages sharply lower during the first thirty minutes of the day. Although the monthly existing home sales data also came in below estimates, the speed of the descent was at least able to slow a bit, but as the day wore on, the market kept sliding lower and lower with much of the selling being concentrated in industrials, tech, materials, and consumer discretionary. However, the worst action by far was seen in the financials, which led to the downside for the entire day, finally finishing the trading session lower by over 6%.
At the same time, we didn’t see the sort of rotation into energy names that many might have expected as investors shied away from the trades that had worked so well for the first half of the year on continued weakness in commodities in general and choppy action in crude. The net result was average losses for the major indices of 2.24% on breadth that was right at 3:1 to the negative and volume that, while lighter than the previous day, was still heavy.
While most of the day’s selling has been blamed on the disappointing economic data, the simple fact is that this market had come too far, too fast off its recent lows and was due for a pullback. A 31% move in the financials over the course of five days just isn’t sustainable without any sort of rest – especially when it was obvious that much of the bounce in the banks and brokers has been driven by heavy short-covering. As we’ve mentioned, a pullback there gives short-term holders a chance to book profits and strong hands the opportunity to accumulate shares. There was an obvious lack of support on Thursday, but the thing that we really need to watch for is some underlying buying interest in the days ahead.
Meanwhile, the big question at this point is if the indices will be able to put in a higher low or if another test of the recent lows is in the cards. Certainly, it’s been all but impossible to put substantial capital to work into this bounce, so investors who have kept their trades small and their time-frames short should be agile enough to avoid much damage if the action continues to deteriorate. The ball has been in bulls’ court and the bottom line here is that the they need to step up to the plate in the coming days.
Greetings Shark Investors:
After bouncing mightily over the past week, stocks pulled back en masse on Thursday as buyers refused to step up to the plate and provide support during a wave of profit-taking. It was another mixed morning of earnings news as MMM and F missed expectations by a wide margin, and AMZN beat estimates, while QCOM offered in-line results and announced that they had settled patent litigation with NOK. Meanwhile, weekly jobless claims showed an increase of 34,000 to 406,000, which was well ahead of the 8,000 increase economists had expected. While the data concerning the labor market over the past several months has yet to show the type of weakness typically associated with a major economic downturn, it is obvious that the job picture is deteriorating.
Although the market opened the day just south of the flat-line, sellers hit the open hard, sending the averages sharply lower during the first thirty minutes of the day. Although the monthly existing home sales data also came in below estimates, the speed of the descent was at least able to slow a bit, but as the day wore on, the market kept sliding lower and lower with much of the selling being concentrated in industrials, tech, materials, and consumer discretionary. However, the worst action by far was seen in the financials, which led to the downside for the entire day, finally finishing the trading session lower by over 6%.
At the same time, we didn’t see the sort of rotation into energy names that many might have expected as investors shied away from the trades that had worked so well for the first half of the year on continued weakness in commodities in general and choppy action in crude. The net result was average losses for the major indices of 2.24% on breadth that was right at 3:1 to the negative and volume that, while lighter than the previous day, was still heavy.
While most of the day’s selling has been blamed on the disappointing economic data, the simple fact is that this market had come too far, too fast off its recent lows and was due for a pullback. A 31% move in the financials over the course of five days just isn’t sustainable without any sort of rest – especially when it was obvious that much of the bounce in the banks and brokers has been driven by heavy short-covering. As we’ve mentioned, a pullback there gives short-term holders a chance to book profits and strong hands the opportunity to accumulate shares. There was an obvious lack of support on Thursday, but the thing that we really need to watch for is some underlying buying interest in the days ahead.
Meanwhile, the big question at this point is if the indices will be able to put in a higher low or if another test of the recent lows is in the cards. Certainly, it’s been all but impossible to put substantial capital to work into this bounce, so investors who have kept their trades small and their time-frames short should be agile enough to avoid much damage if the action continues to deteriorate. The ball has been in bulls’ court and the bottom line here is that the they need to step up to the plate in the coming days.
Thursday, July 24, 2008
Free Newsletter: Stalking Stocks with the Shark - Market Makes Further Progress - 7/23/08
Free Newsletter: Stalking Stocks with the Shark - Market Makes Further Progress - 7/23/08
Greetings Shark Investors:
Although the trading to start the day was very choppy, the action settled down in the afternoon as the market drifted into Wednesday’s close with modest gains. The early morning was once again chock-full of earnings news for investors to digest, and as has been the case over the past few weeks, the results were mixed. BA missed both top- and bottom-line estimates, PFE beat by a penny, T met earnings expectations but fell short on the revenue side, and MCD blew their numbers out of the water. However, the biggest factor affecting early sentiment was another sharp drop-off in crude and continuing strength in the greenback following comments from Treasury Secretary Paulson and Philadelphia Fed President Plosser that were supportive of a stronger dollar.
As such, the market opened the day in positive territory with consumer discretionary, financials, tech and industrials continuing their strong afternoon rally from the previous day while energy and materials dropped sharply. However, the strong action to start the day wasn’t to last because about an hour after the open, just about the entire market reversed following the weekly oil inventory report which showed a much larger than expected decline in inventories. Still, even though that news triggered a quick pop in energy and materials, and a drop in tech, financials and consumer discretionary, the averages found support right around the unchanged mark as we headed into the New York lunch hour.
Although the trading had been wild up to that point, the action calmed down considerably for the remainder of the day. Although financials finished the day lower, a 0.4% loss after a remarkable 31% rally is certainly within reason. Meanwhile, industrials, consumer discretionary and tech drifted higher for the rest of the day while energy and materials kept falling straight into the close. The net result was average gains of 0.54% for the indices on heavy volume and breadth that was right at 3:2 to the positive. So, while the action was not nearly as bullish as it was on Tuesday, the market was able to make further progress repair more of the severe technical damage from the past few weeks.
The big question, of course, is: can this continue? With the major indices bumping up against overhead resistance, the thing this market really needs is some healthy backing and filling that would allow shorter-term holders who have ridden this bounce to be replaced by stronger hands. Another major element that has yet to emerge is strong leadership. If this move turns out to be sustainable and the pullback in commodities is for real, then that means those groups which led for much of this year so far will take a back seat. However, it is still unclear which groups will take on that role.
The bottom line is that conditions are in place for the bulls to turn the tide, but it’s not going to be an easy job by any means. We’ve had a start, but it is still too early to be celebrating the end of this bear market and jumping in with both feet.
Greetings Shark Investors:
Although the trading to start the day was very choppy, the action settled down in the afternoon as the market drifted into Wednesday’s close with modest gains. The early morning was once again chock-full of earnings news for investors to digest, and as has been the case over the past few weeks, the results were mixed. BA missed both top- and bottom-line estimates, PFE beat by a penny, T met earnings expectations but fell short on the revenue side, and MCD blew their numbers out of the water. However, the biggest factor affecting early sentiment was another sharp drop-off in crude and continuing strength in the greenback following comments from Treasury Secretary Paulson and Philadelphia Fed President Plosser that were supportive of a stronger dollar.
As such, the market opened the day in positive territory with consumer discretionary, financials, tech and industrials continuing their strong afternoon rally from the previous day while energy and materials dropped sharply. However, the strong action to start the day wasn’t to last because about an hour after the open, just about the entire market reversed following the weekly oil inventory report which showed a much larger than expected decline in inventories. Still, even though that news triggered a quick pop in energy and materials, and a drop in tech, financials and consumer discretionary, the averages found support right around the unchanged mark as we headed into the New York lunch hour.
Although the trading had been wild up to that point, the action calmed down considerably for the remainder of the day. Although financials finished the day lower, a 0.4% loss after a remarkable 31% rally is certainly within reason. Meanwhile, industrials, consumer discretionary and tech drifted higher for the rest of the day while energy and materials kept falling straight into the close. The net result was average gains of 0.54% for the indices on heavy volume and breadth that was right at 3:2 to the positive. So, while the action was not nearly as bullish as it was on Tuesday, the market was able to make further progress repair more of the severe technical damage from the past few weeks.
The big question, of course, is: can this continue? With the major indices bumping up against overhead resistance, the thing this market really needs is some healthy backing and filling that would allow shorter-term holders who have ridden this bounce to be replaced by stronger hands. Another major element that has yet to emerge is strong leadership. If this move turns out to be sustainable and the pullback in commodities is for real, then that means those groups which led for much of this year so far will take a back seat. However, it is still unclear which groups will take on that role.
The bottom line is that conditions are in place for the bulls to turn the tide, but it’s not going to be an easy job by any means. We’ve had a start, but it is still too early to be celebrating the end of this bear market and jumping in with both feet.
Wednesday, July 23, 2008
Free Newsletter: Stalking Stocks with the Shark - Market Enhoys Antother Financial-Led Bounce - 7/22/08
Free Newsletter: Stalking Stocks with the Shark - Market Enhoys Antother Financial-Led Bounce - 7/22/08
Greetings Shark Investors:
The major indices were able to regain another big chunk of ground on Tuesday as another pullback in crude and a late spurt of buying helped to turn a rough open on the heels of several disappointing earnings reports into another day of strong action. Indications were for a much lower start to the day following poor earnings results from AAPL, TXN, WB and AXP. Tech names have seen some very poor reports recently, and with AAPL and TXN lowering guidance and the latter missing both top and bottom line estimates, the pressure continued for that sector. Meanwhile, financials have seen a remarkable recovery off lows, and the news from WB and AXP threatened to put that rally to the test.
As such, the market opened the day well into the red, but the early downdraft didn’t last long after news that Tropical Storm Dolly would miss energy assets in the Gulf of Mexico triggered a sharp and sudden pullback in crude. While that put pressure on both energy and materials, it did spark a reversal in the broader market which sent the averages back towards the unchanged mark. Most notably, however, was the fact that the financials were able to shrug off the morning’s earning’s news and work their way into positive territory.
The action settled down as we headed into the New York lunch hour as the major indices spent the next few hours trading in a narrow range, and as we worked our way through the afternoon, it was looking like we were headed for a mixed close. That said, given the rough open, such a finish to the day would have been pretty darn good. However, a fresh wave of buying kicked in about 90 minutes before the close which sent just about the entire market, but especially financials, sharply higher straight into the close. By the end of the day, the indices finished with gains of, on average, 1.2% on good volume and breadth that was about 2:1 to the positive.
Although much of the early recovery was the result of the drop-off in oil and there’s still plenty of folks who suspect that most of the recent improvement is the result of the short selling restrictions on a handful of large financial companies, there’s no getting around the fact that it was a strong day for the bulls. The ability of this market to rally in the face of unexpectedly bad earnings news is quite encouraging, but at the same time, the indices have moved straight up onto overhead resistance. That has put the ball firmly into the bulls’ court, and they need to follow through in the coming days.
Of course, individual investors need to be considering to what extent they want to try and ride along with these recent moves. As we have pointed out, most of the recent strength has been concentrated in areas with the weakest charts while the types of set-ups that would encourage more aggressive position building are few and far between. While we are seeing some short-term trading opportunities, it is imperative that we keep our eyes on the bigger picture, which is decidedly negative.
The bottom line is that, while we’ve possibly seen the beginnings of some better action to the upside, we need to remain highly skeptical about the sustainability of any move that is counter to the primary trend. The simple fact is that we are in a bear market, and while that means we will ultimately find tremendous buying opportunities once it’s over, it can inflict tremendous damage on our capital if we follow the advice of gurus and so-called pros who say we need to be buying all the way down. There are obviously trades to be had right now, but with technical resistance looming nearby, it’s difficult at best to think that we are going to see easy sailing from here, However, if this sort of action continues and the averages are able to continues to improve technically, then we’ll start to see the sort of set-up that invite real buying.
Tuesday, July 22, 2008
Free Newsletter: Stalking Stocks with the Shark - Decent Underlying Action Despite Losses - 7/21/08
Free Newsletter: Stalking Stocks with the Shark - Decent Underlying Action Despite Losses - 7/21/08
Greetings Shark Investors:
The market once again danced to the tune of oil and financials on Monday in what turned out to be one of the quietest trading sessions we’ve seen in a while. Early morning indications were for a lower start to the day after news that Tropical Storm Dolly could potentially threaten energy assets in the Gulf of Mexico. However, index futures made their way back into positive territory on news that Roche Holdings, a European drug company, was seeking to acquire the rest of the shares of DNA that they didn’t already own. Sentiment was goosed further after BAC reported earnings that, while down 44% on a year-over-year basis, were well ahead of analyst expectations.
As such, the market opened the day in positive territory with most of the sectors trading higher at the bell. However, after a quick pop, the averages began what would turn out to be a morning-long trend lower as just about every area of the market, save energy and materials, started to roll over. By mid-morning, the averages were hovering above the unchanged mark, but fell sharply to the lows of the session after slipping into negative territory.
Although the market was able to move modestly off its lows as we worked our way through the New York lunch hour and into the afternoon, a sudden and sharp spike past $131 in crude sent the averages right back down. A small spurt of buying ahead of the final bell took us off the afternoon lows, and by the end of the day, the indices finished with losses of 0.14%, on average.
Still, despite the modest losses, volume was light, breadth finished right at 3:2 to the positive, small-caps outperformed and the financials were able to hold on to its recent gains once again. All in all, this is the exact sort of action that we should look for as the market digests last week’s huge move. That said, the most concerning aspect of the action over the past few days is the underperformance in the tech sector which has come on the heels of a string of disappointing earnings reports from key companies such as MSFT, AMD and GOOG. Given that tech accounts for nearly 20% of the S&P 500, it’s going to be difficult for a sustainable counter-trend move to develop with that area acting as a weight.
Regardless, some of the best action over the past several days has been in those stocks which have the absolute worst charts while the vast majority of stocks are a long ways from having the kind of set-ups which support longer-term position building. Should this nascent bounce develop further, then those set-ups will come. In the meantime, however, individual investors would be best served by sticking with a disciplined approach and not chasing stocks that have been bouncing towards overhead resistance levels.
Greetings Shark Investors:
The market once again danced to the tune of oil and financials on Monday in what turned out to be one of the quietest trading sessions we’ve seen in a while. Early morning indications were for a lower start to the day after news that Tropical Storm Dolly could potentially threaten energy assets in the Gulf of Mexico. However, index futures made their way back into positive territory on news that Roche Holdings, a European drug company, was seeking to acquire the rest of the shares of DNA that they didn’t already own. Sentiment was goosed further after BAC reported earnings that, while down 44% on a year-over-year basis, were well ahead of analyst expectations.
As such, the market opened the day in positive territory with most of the sectors trading higher at the bell. However, after a quick pop, the averages began what would turn out to be a morning-long trend lower as just about every area of the market, save energy and materials, started to roll over. By mid-morning, the averages were hovering above the unchanged mark, but fell sharply to the lows of the session after slipping into negative territory.
Although the market was able to move modestly off its lows as we worked our way through the New York lunch hour and into the afternoon, a sudden and sharp spike past $131 in crude sent the averages right back down. A small spurt of buying ahead of the final bell took us off the afternoon lows, and by the end of the day, the indices finished with losses of 0.14%, on average.
Still, despite the modest losses, volume was light, breadth finished right at 3:2 to the positive, small-caps outperformed and the financials were able to hold on to its recent gains once again. All in all, this is the exact sort of action that we should look for as the market digests last week’s huge move. That said, the most concerning aspect of the action over the past few days is the underperformance in the tech sector which has come on the heels of a string of disappointing earnings reports from key companies such as MSFT, AMD and GOOG. Given that tech accounts for nearly 20% of the S&P 500, it’s going to be difficult for a sustainable counter-trend move to develop with that area acting as a weight.
Regardless, some of the best action over the past several days has been in those stocks which have the absolute worst charts while the vast majority of stocks are a long ways from having the kind of set-ups which support longer-term position building. Should this nascent bounce develop further, then those set-ups will come. In the meantime, however, individual investors would be best served by sticking with a disciplined approach and not chasing stocks that have been bouncing towards overhead resistance levels.
Monday, July 21, 2008
Free Newsletter: Stalking Stocks with the Shark - Mixed Day, But Market Holds - 7/20/08
Free Newsletter: Stalking Stocks with the Shark - Mixed Day, But Market Holds - 7/20/08
Greetings Shark Investors:
Although Friday’s trading session by no means provided the same sort of wildly bullish action that we saw mid-week, the market was able to hold on, for the most part, to the strong gains from the previous two days. As we mentioned in our last Stalking Stocks newsletter, disappointing earnings reports from GOOG, MSFT, ZION, MER and AMD threatened to put the bulls to the test as we headed towards the weekend. However, the Dow and S&P 500 index futures were able to come well off their early lows about 90 minutes before the opening bell after C reported earnings that were not nearly as bad as had been expected.
As such, the market opened in mixed territory, but as the day got under way, investors took the opportunity to take some quick profits in financials and consumer discretionary and bought energy stocks. However, even though it looked as if a reversal of the past few days’ action might be under way, oil began to work its way lower about 30 minutes after the opening bell. While the pullback wasn’t nearly as large as it had been the past two days, the implication was that investors weren’t going to be piling back into Texas Tea with nearly as much enthusiasm as had become the norm. The net result was quick recovery for financials and consumer discretionary which in turn too the broader market off its early lows.
The choppy action wasn’t over for the day, however, because a quick jump off the lows for oil sent the averages back into negative territory as we worked our way through the New York lunch hour. Finally, one last reversal in black gold allowed the broader market to change course once again and trend higher for the remainder of the session to finish the day in mixed territory.
Certainly, the performance in tech on Friday left a lot to be desired, and given that the sector accounts for the largest portion of the S&P 500, it’s little surprise that the market as a whole wasn’t able to generate much in the way of upside action. Moreover, given the choppy action and quick swings that occurred each time oil hiccupped, it’s obvious that there’s a high level of uncertainty when it comes to the near-term direction of crude. That said, the fact that investors weren’t more eager to lock in some recent gains ahead of the weekend is encouraging.
The thing that we really need to see at this point is for the market to digest what were some impressive gains on light volume and then following through to the upside. We’ve been pointing out that, given the oversold conditions, it probably wouldn’t take too much to let go of the proverbial rubber band. The key now, is for buyers to show up ready to act when we see the inevitable pullback and engineer a good follow-through day. At this point, much of the action to the upside this past week was found in stocks that have the worst looking charts, making it tough to take the leap of faith required to buy stocks that were aggressively hitting multi-year lows just days before. However, if we are at the cusp of a new counter-trend, then better set-ups will start to present themselves.
Greetings Shark Investors:
Although Friday’s trading session by no means provided the same sort of wildly bullish action that we saw mid-week, the market was able to hold on, for the most part, to the strong gains from the previous two days. As we mentioned in our last Stalking Stocks newsletter, disappointing earnings reports from GOOG, MSFT, ZION, MER and AMD threatened to put the bulls to the test as we headed towards the weekend. However, the Dow and S&P 500 index futures were able to come well off their early lows about 90 minutes before the opening bell after C reported earnings that were not nearly as bad as had been expected.
As such, the market opened in mixed territory, but as the day got under way, investors took the opportunity to take some quick profits in financials and consumer discretionary and bought energy stocks. However, even though it looked as if a reversal of the past few days’ action might be under way, oil began to work its way lower about 30 minutes after the opening bell. While the pullback wasn’t nearly as large as it had been the past two days, the implication was that investors weren’t going to be piling back into Texas Tea with nearly as much enthusiasm as had become the norm. The net result was quick recovery for financials and consumer discretionary which in turn too the broader market off its early lows.
The choppy action wasn’t over for the day, however, because a quick jump off the lows for oil sent the averages back into negative territory as we worked our way through the New York lunch hour. Finally, one last reversal in black gold allowed the broader market to change course once again and trend higher for the remainder of the session to finish the day in mixed territory.
Certainly, the performance in tech on Friday left a lot to be desired, and given that the sector accounts for the largest portion of the S&P 500, it’s little surprise that the market as a whole wasn’t able to generate much in the way of upside action. Moreover, given the choppy action and quick swings that occurred each time oil hiccupped, it’s obvious that there’s a high level of uncertainty when it comes to the near-term direction of crude. That said, the fact that investors weren’t more eager to lock in some recent gains ahead of the weekend is encouraging.
The thing that we really need to see at this point is for the market to digest what were some impressive gains on light volume and then following through to the upside. We’ve been pointing out that, given the oversold conditions, it probably wouldn’t take too much to let go of the proverbial rubber band. The key now, is for buyers to show up ready to act when we see the inevitable pullback and engineer a good follow-through day. At this point, much of the action to the upside this past week was found in stocks that have the worst looking charts, making it tough to take the leap of faith required to buy stocks that were aggressively hitting multi-year lows just days before. However, if we are at the cusp of a new counter-trend, then better set-ups will start to present themselves.
Friday, July 18, 2008
Free Newsletter: Stalking Stocks with the Shark - Market Finally Manages To Build On A Rally - 1/17/08
Free Newsletter: Stalking Stocks with the Shark - Market Finally Manages To Build On A Rally - 1/17/08
Greetings Shark Investors:
For the first time in over two months, the market was not only able to hold on to the gains which resulted from an oversold bounce, but it was also able to build on them. Although early morning indications were for a soft start as investors wondered if the previous day’s rally would simply turn out to be another opportunity for trapped longs to exit their bleeding positions and for shorts to press further to the downside, better than expected earnings results and economic data helped push index futures sharply higher. Specifically, JPM, UTX, KO, PNC and HOG all delivered earnings that handily beat estimates. We’ve been talking recently that, given how poorly that market has acted lately and how sour sentiment has become, earnings reports would certainly act as a catalyst to get things moving. With two of those companies being Dow components, one being a regional bank, one a major broker, and the last a consumer discretionary bellwether, it’s little surprise that the mood improved markedly following their numbers. Also goosing things early on was data that showed both housing starts and building permits beat consensus estimates, and althought the weekly jobless claims number was higher than last week, it was much lighter than had been anticipated.
As such the market opened the day well into the green, with each sector – save utilities and staples (which are both highly defensive areas) – either gapping sharply higher or climbing steadily after the open. Still given the propensity of this market to give up its gains rather quickly recently, the choppy action and general hesitation as the day got under way was understandable. However, even though the averages fell back to the flat-line after trending lower for the first 90 minutes, another unexpected drop in crude prices triggered a fresh wave of buying in equities,
A second push lower for Texas Tea in the middle of the New York lunch hour sent the market appreciably higher - straight to what would turn out to be the highs of the session by mid-afternoon. While the indices gave back a portion of that last spurt of buying, they were able to finish the day near highs with averages gains of 1.2% on increasing volume and breadth that was barely shy of 5:2 to the positive.
Certainly, another day of strong gains with financials and consumer discretionary leading while the weak-dollar plays which drove the March / May rally got hammered is a real change of pace over what we’ve seen recently. The big question, of course, is if this pullback in commodities and move into financials and other growth areas is indicative of a more sustainable sector rotation, or if the proverbial rubber band got stretched a bit too far. Without a doubt, a 19% two-day jump in the financials is a big move, and it’s hard to imagine we’ll see them keep going straight us as investors decide to book gains and quit while they’re ahead.
We’ll have to see how it goes, but given the reaction to poor earnings reports after the bell from MSFT, MER, ZION, COF and GOOG, it looks like the bulls are going to have their work cut out for them.
As a reminder, feel free to check out our new free intraday market commentary on our home page at www.sharkinvesting.com.
Greetings Shark Investors:
For the first time in over two months, the market was not only able to hold on to the gains which resulted from an oversold bounce, but it was also able to build on them. Although early morning indications were for a soft start as investors wondered if the previous day’s rally would simply turn out to be another opportunity for trapped longs to exit their bleeding positions and for shorts to press further to the downside, better than expected earnings results and economic data helped push index futures sharply higher. Specifically, JPM, UTX, KO, PNC and HOG all delivered earnings that handily beat estimates. We’ve been talking recently that, given how poorly that market has acted lately and how sour sentiment has become, earnings reports would certainly act as a catalyst to get things moving. With two of those companies being Dow components, one being a regional bank, one a major broker, and the last a consumer discretionary bellwether, it’s little surprise that the mood improved markedly following their numbers. Also goosing things early on was data that showed both housing starts and building permits beat consensus estimates, and althought the weekly jobless claims number was higher than last week, it was much lighter than had been anticipated.
As such the market opened the day well into the green, with each sector – save utilities and staples (which are both highly defensive areas) – either gapping sharply higher or climbing steadily after the open. Still given the propensity of this market to give up its gains rather quickly recently, the choppy action and general hesitation as the day got under way was understandable. However, even though the averages fell back to the flat-line after trending lower for the first 90 minutes, another unexpected drop in crude prices triggered a fresh wave of buying in equities,
A second push lower for Texas Tea in the middle of the New York lunch hour sent the market appreciably higher - straight to what would turn out to be the highs of the session by mid-afternoon. While the indices gave back a portion of that last spurt of buying, they were able to finish the day near highs with averages gains of 1.2% on increasing volume and breadth that was barely shy of 5:2 to the positive.
Certainly, another day of strong gains with financials and consumer discretionary leading while the weak-dollar plays which drove the March / May rally got hammered is a real change of pace over what we’ve seen recently. The big question, of course, is if this pullback in commodities and move into financials and other growth areas is indicative of a more sustainable sector rotation, or if the proverbial rubber band got stretched a bit too far. Without a doubt, a 19% two-day jump in the financials is a big move, and it’s hard to imagine we’ll see them keep going straight us as investors decide to book gains and quit while they’re ahead.
We’ll have to see how it goes, but given the reaction to poor earnings reports after the bell from MSFT, MER, ZION, COF and GOOG, it looks like the bulls are going to have their work cut out for them.
As a reminder, feel free to check out our new free intraday market commentary on our home page at www.sharkinvesting.com.
Thursday, July 17, 2008
Podcast Update - www.sharkinvesting.com
In this podcast, RevShark stresses the importance of staying patient and understanding your individual investment style.
Visit: www.SharkInvesting.com and Click on Shark Bites.
Visit: www.SharkInvesting.com and Click on Shark Bites.
Free Newsletter: Stalking Stocks with the Shark - Textbook Oversold Rally - 7/16/08
Free Newsletter: Stalking Stocks with the Shark - Textbook Oversold Rally - 7/16/08
Greetings Shark Investors:
The oversold bounce that just about everyone had been waiting for finally kicked in on Wednesday as investors overlooked discouraging inflation data and a downbeat Fed and focused instead on another drop in crude prices and surprising earnings results. It was a bumpy ride ahead of the opening bell as index futures changed from red to green and back to red. Early indications were for a slightly negative start to the day following the previous day’s dismal close, but sentiment improved markedly after WFC and SCHW both reported earnings that were well ahead of analyst estimates. However, hotter-than-expected consumer inflation data dampened the mood once again.
That choppy action carried over after the opening bell as the major indices fell into the red, turned green and then fell back towards the flat-line within the first hour of trading. However, the action improved markedly after the weekly oil inventory data showed a build of 2.95 million barrels versus an expected decline of 2.2 million barrels. As such, just about the entire market moved to fresh highs with tech, industrials, consumer discretionary and healthcare sporting decent gains. The real action, however, was in the financials, which by mid-morning were ahead by about 7%.
While the action was still a bit choppy for the rest of the morning, the major indices began to march steadily higher just as the New York lunch hour got under way. From that point on, almost every area of the market, save energy and utilities, continued to move steadily higher. Even some very gloomy comments regarding second-half growth and inflation in the minutes from the Fed’s most recent meeting failed to slow the relentless push higher. By the end of the day, each of the major indices closed with gains, on average, of 2.71%, with the financials finishing an eye-popping 12.41% higher.
Without a doubt, it was a strong day, and was a perfect example of how oversold bounces can develop in a bear market. Just a couple of days ago, concerns over the failure of IndyMac and emergency government actions caused tremendous strain on an already fragile market. However, all of those worries were cast aside as shorts rushed to cover their positions and longs scrambled to add exposure. Once that kind of action begins to feed on itself, it can lead to what are often some of the most vigorous moves to the upside. That said, the key is to see if we will at last see some follow-thorough to the upside in the days ahead. Given how many times bounces over the past two months have turned out to be one-day affairs, it’s hard to put much trust into this one.
However, as we have been pointing out, earnings season may very well turn out to provide the catalysts this market needs for a more tradable counter-trend move to develop. We’ll get another test on Thursday when more financial companies, including JPM, MER, ZION and COF tell us how the second quarter went.
Greetings Shark Investors:
The oversold bounce that just about everyone had been waiting for finally kicked in on Wednesday as investors overlooked discouraging inflation data and a downbeat Fed and focused instead on another drop in crude prices and surprising earnings results. It was a bumpy ride ahead of the opening bell as index futures changed from red to green and back to red. Early indications were for a slightly negative start to the day following the previous day’s dismal close, but sentiment improved markedly after WFC and SCHW both reported earnings that were well ahead of analyst estimates. However, hotter-than-expected consumer inflation data dampened the mood once again.
That choppy action carried over after the opening bell as the major indices fell into the red, turned green and then fell back towards the flat-line within the first hour of trading. However, the action improved markedly after the weekly oil inventory data showed a build of 2.95 million barrels versus an expected decline of 2.2 million barrels. As such, just about the entire market moved to fresh highs with tech, industrials, consumer discretionary and healthcare sporting decent gains. The real action, however, was in the financials, which by mid-morning were ahead by about 7%.
While the action was still a bit choppy for the rest of the morning, the major indices began to march steadily higher just as the New York lunch hour got under way. From that point on, almost every area of the market, save energy and utilities, continued to move steadily higher. Even some very gloomy comments regarding second-half growth and inflation in the minutes from the Fed’s most recent meeting failed to slow the relentless push higher. By the end of the day, each of the major indices closed with gains, on average, of 2.71%, with the financials finishing an eye-popping 12.41% higher.
Without a doubt, it was a strong day, and was a perfect example of how oversold bounces can develop in a bear market. Just a couple of days ago, concerns over the failure of IndyMac and emergency government actions caused tremendous strain on an already fragile market. However, all of those worries were cast aside as shorts rushed to cover their positions and longs scrambled to add exposure. Once that kind of action begins to feed on itself, it can lead to what are often some of the most vigorous moves to the upside. That said, the key is to see if we will at last see some follow-thorough to the upside in the days ahead. Given how many times bounces over the past two months have turned out to be one-day affairs, it’s hard to put much trust into this one.
However, as we have been pointing out, earnings season may very well turn out to provide the catalysts this market needs for a more tradable counter-trend move to develop. We’ll get another test on Thursday when more financial companies, including JPM, MER, ZION and COF tell us how the second quarter went.
Wednesday, July 16, 2008
Free Newsletter: Stalking Stocks with the Shark - Still No Capitulation - 7/15/08
Free Newsletter: Stalking Stocks with the Shark - Still No Capitulation - 7/15/08
Greetings Shark Investors:
Volatility was the name of the game once again on Tuesday as the major indices were able to recover from an absolute drubbing in the morning to finish the day in mixed territory. Following the previous day’s dismal session, indications were for a significantly lower start to the day as concerns over the health of the U.S. financial sector sent global markets sharply lower in overnight trading. In addition to that pressure, market players also had plenty of economic and earnings data to contend with. About an hour before the open, index futures came off their worst levels of the early morning after JNJ delivered solid second quarter results and raised their guidance. Meanwhile, retail sales failed to impress after increasing 0.1% versus an expected 0.2%. However, both core PPI and the NY Empire State index came in better than expected at 0.2% and -4.9, respectively.
Despite the improvement ahead of the bell, stocks opened the day sharply lower, but after spending the first thirty minutes moving straight down to what would turn out to be the lows of the session, they began to turn around after Fed Chairman Bernanke told the Senate Banking Committee that the U.S. banking system was well-capitalized. The ensuing move to the upside accelerated after crude suddenly took a nose dive on no apparent catalyst. From that point, the averages marched steadily higher back towards the flat-line, finally reaching positive territory just as we entered the afternoon. For the next couple of hours, the market chopped around in a relatively narrow trading range, but just as we entered the final hour, a sudden wave of selling hit, sending just about the entire market sharply lower straight into the close.
By the end of the day, the indices lost, on average, 0.60% on breadth that was right at 2:1 to the negative. Once again, the results were certainly not as bad as the early action indicated it might be, but at the same time, the mid-morning rally negated what looked to be a day in which we would see the sort of capitulatory selling that would set this market up for a more tradable counter-trend move. Instead, investors are left to deal with action that continues to be driven by short-term traders and brief bounces to the upside which fail just as soon as they get under way. We are left to deal with quick drops and fast bounces which give those with shorter time-frame a change to book whatever gains they may have.
That said, given that absolutely none of the action to the upside has been able to stick for going on two months now, it’s completely understandable that market players would move aggressively to book gains as soon as they occur. The dismal action into the close simply highlights that.
Regardless, even if we don’t see some sort of capitulatory event, we do at least have some potential catalysts for action to the upside with earnings season getting under way. Like we have said, given how oversold this market is, we could very well see some short-covering rallies once the reports really start rolling in. However, the thing to keep in mind is that, if we do see this market begin to make a little progress off the lows, a lot of it will likely be driven by rebounds in some of the worst looking charts. We won’t be seeing real bullish set-ups for quite some time.
Tuesday, July 15, 2008
Free Newsletter: Stalking Stocks with the Shark - Bailout Plans Fail To Inspire - 7/14/08
Free Newsletter: Stalking Stocks with the Shark - Bailout Plans Fail To Inspire - 7/14/08
Greetings Shark Investors:
The market suffered through another disappointing trading session as worries regarding the health of regional banks outweighed the latest government bailout plans. It was a busy weekend as news spread late Friday that the FDIC had moved to seize IndyMac (IMB) after a run on the bank caused it to fail. While that event had the potential to put significant pressure on the market when it opened on Monday, the Treasury Department and the Federal Reserve announced a plan to shore up both FNM and FRE just before Asian markets opened late Sunday night. The plan would allow Treasury to increase its credit lines to the GSEs and buy their stock to ensure they had enough capital to operate. The Fed also announced that their discount window would be available to both companies.
As such, the market started the day by gapping sharply higher, but even though the GSE news had the potential to be the sort of catalyst that would trigger a decent bounce, sellers hit the open hard, sending FNM and FRE right back to the flat-line. In fact, just about the entire market, save energy, saw heavy selling pressure, but the worst action was in the financials in general and the regional banks in particular as fears that there might be more bank failures spread. For the rest of the morning and through the New York lunch hour, stocks continued to move steadily lower before finally reaching what would turn out to be the lows of the session just as we entered the afternoon.
It was a bumpy ride for the rest of the day as a modest recovery failed to gain much traction. But just as it looked like the averages were headed for the lows once again, what can only be described as a massive buy program kicked in, sending every area of the market straight up. However, as has been the case each time we’ve seen any action to the upside, that bounce ended just as soon as it began. By the end of the day the indices lost, on average, 0.83% on breadth that was about 2:1 to the negative. Poor results, to be sure, but the final results were minor when compared to the bloodletting in the regional banks. For example, the KBW Regional Banking Index ETF (KRE) lost a whopping 8.25% while WM, FHN and ZION, dropped 34.75%, 24.78% and 23.20%, respectively.
Certainly, those terrible results highlight the fact that this market still has little grasp on the problems which originated with the subprime debacle and began to surface early last year. The biggest difficulty that investors face right now is that the current oversold conditions make it difficult to really press to the downside, but at the same time, the inability of this market to hold on to any gains makes pursuing any longs a losing strategy. Instead of getting the sort of panicked washout that would set us up for a more tradable bounce, we end up having to deal with a market that continues to trend lower, punctuated by brief bouts of action to the upside that gives trapped longs an opportunity to sell and shorts a chance to press further.
Amid all of this, we have earnings season to contend with. Like we said in our last Stalking Stocks newsletter, the dismal action over the past several weeks as well as the low expectations for second quarter results could trigger some short-covering rallies. However, until the financials are able to put in a meaningful bottom, it’s going to be hard for this market to see any sustained action to the upside.
Regardless, longer-term investors who raised cash as the technical conditions began to deteriorate in May are in a good position to ride this out. There’s simply no reason right now to try and anticipate a turnaround. The pricing action will let us know when we can begin to put our capital to work once again.
Greetings Shark Investors:
The market suffered through another disappointing trading session as worries regarding the health of regional banks outweighed the latest government bailout plans. It was a busy weekend as news spread late Friday that the FDIC had moved to seize IndyMac (IMB) after a run on the bank caused it to fail. While that event had the potential to put significant pressure on the market when it opened on Monday, the Treasury Department and the Federal Reserve announced a plan to shore up both FNM and FRE just before Asian markets opened late Sunday night. The plan would allow Treasury to increase its credit lines to the GSEs and buy their stock to ensure they had enough capital to operate. The Fed also announced that their discount window would be available to both companies.
As such, the market started the day by gapping sharply higher, but even though the GSE news had the potential to be the sort of catalyst that would trigger a decent bounce, sellers hit the open hard, sending FNM and FRE right back to the flat-line. In fact, just about the entire market, save energy, saw heavy selling pressure, but the worst action was in the financials in general and the regional banks in particular as fears that there might be more bank failures spread. For the rest of the morning and through the New York lunch hour, stocks continued to move steadily lower before finally reaching what would turn out to be the lows of the session just as we entered the afternoon.
It was a bumpy ride for the rest of the day as a modest recovery failed to gain much traction. But just as it looked like the averages were headed for the lows once again, what can only be described as a massive buy program kicked in, sending every area of the market straight up. However, as has been the case each time we’ve seen any action to the upside, that bounce ended just as soon as it began. By the end of the day the indices lost, on average, 0.83% on breadth that was about 2:1 to the negative. Poor results, to be sure, but the final results were minor when compared to the bloodletting in the regional banks. For example, the KBW Regional Banking Index ETF (KRE) lost a whopping 8.25% while WM, FHN and ZION, dropped 34.75%, 24.78% and 23.20%, respectively.
Certainly, those terrible results highlight the fact that this market still has little grasp on the problems which originated with the subprime debacle and began to surface early last year. The biggest difficulty that investors face right now is that the current oversold conditions make it difficult to really press to the downside, but at the same time, the inability of this market to hold on to any gains makes pursuing any longs a losing strategy. Instead of getting the sort of panicked washout that would set us up for a more tradable bounce, we end up having to deal with a market that continues to trend lower, punctuated by brief bouts of action to the upside that gives trapped longs an opportunity to sell and shorts a chance to press further.
Amid all of this, we have earnings season to contend with. Like we said in our last Stalking Stocks newsletter, the dismal action over the past several weeks as well as the low expectations for second quarter results could trigger some short-covering rallies. However, until the financials are able to put in a meaningful bottom, it’s going to be hard for this market to see any sustained action to the upside.
Regardless, longer-term investors who raised cash as the technical conditions began to deteriorate in May are in a good position to ride this out. There’s simply no reason right now to try and anticipate a turnaround. The pricing action will let us know when we can begin to put our capital to work once again.
Monday, July 14, 2008
Free Newsletter: Stalking Stocks with the Shark - Pressures Mount Once Again - 07-14-08
Free Newsletter: Stalking Stocks with the Shark - Pressures Mount Once Again - 07-14-08
Greetings Shark Investors:
It was another wild day for the market on Friday as continuing concerns about the viability of both Fannie Mae and Freddie Mac weighed on an already fragile market. Indications were for a gap lower at the open early in the morning following reports that the government could nationalize FNM and FRE should their capitalization problems deteriorate further. Also dampening sentiment was yet another spike in crude which sent that commodity right back to recent highs. Meanwhile, GE reported earnings ahead of the bell, and unlike last quarter when they triggered a broad-based sell-off after missing estimates by a wide margin, their results were in-line with estimates.
As such, the major indices opened the day well into negative territory, and even though the market was able to recover some ground in the early going, the pressure mounted once again after Treasury Secretary Paulson stated that there were no current plans to bailout out either of the GSEs. After falling back to the early lows in a matter of minutes, the averages spent the rest of the morning and the New York lunch hour steadily inching lower. Although we were able to make a little progress off what turned out to be the lows of the session as the afternoon got underway, stocks suddenly shot higher across the board after word broke that Fed Chairman Bernanke had told the head of FRE that both GSEs would be eligible to use the Fed’s discount window.
While that move took each of the indices straight back to the flat line, it was over just as soon as it began, as a fresh wave of selling kicked in once the news regarding the Fed and FRE could not be confirmed. By the end of the day, the indices lost, on average, 1.02% on breadth that was about 3:2 to the negative. While that’s not nearly as bad as it could have been, yet more technical damage on increasing volume certainly is not the way the bulls wanted to finished out the week – especially as earnings season gets under way in earnest. Given how sharply and quickly stocks have fallen recently, it might not take much to trigger some fast pops. The recent volatility and vigor of intraday reversals only supports the idea that this market can easily get pushed around right now.
That said, while the current conditions might favor shorter-term investors who have the ability to reposition rapidly, timing such moves is tricky to say the least. Oversold market conditions are by no means a guarantee of action in the opposite direction, and even should a relief rally occur, there’s no telling how long it will last. Specifically, the inability of this market to hold on to even the slightest of gains recently makes it exceedingly important for investors to book any gains and cut any losses quickly.
That said, longer-term investors still need to simply wait and bide their time while this market searches for a bottom. We have a long way to go before it will be time to even start thinking about building positions.
Greetings Shark Investors:
It was another wild day for the market on Friday as continuing concerns about the viability of both Fannie Mae and Freddie Mac weighed on an already fragile market. Indications were for a gap lower at the open early in the morning following reports that the government could nationalize FNM and FRE should their capitalization problems deteriorate further. Also dampening sentiment was yet another spike in crude which sent that commodity right back to recent highs. Meanwhile, GE reported earnings ahead of the bell, and unlike last quarter when they triggered a broad-based sell-off after missing estimates by a wide margin, their results were in-line with estimates.
As such, the major indices opened the day well into negative territory, and even though the market was able to recover some ground in the early going, the pressure mounted once again after Treasury Secretary Paulson stated that there were no current plans to bailout out either of the GSEs. After falling back to the early lows in a matter of minutes, the averages spent the rest of the morning and the New York lunch hour steadily inching lower. Although we were able to make a little progress off what turned out to be the lows of the session as the afternoon got underway, stocks suddenly shot higher across the board after word broke that Fed Chairman Bernanke had told the head of FRE that both GSEs would be eligible to use the Fed’s discount window.
While that move took each of the indices straight back to the flat line, it was over just as soon as it began, as a fresh wave of selling kicked in once the news regarding the Fed and FRE could not be confirmed. By the end of the day, the indices lost, on average, 1.02% on breadth that was about 3:2 to the negative. While that’s not nearly as bad as it could have been, yet more technical damage on increasing volume certainly is not the way the bulls wanted to finished out the week – especially as earnings season gets under way in earnest. Given how sharply and quickly stocks have fallen recently, it might not take much to trigger some fast pops. The recent volatility and vigor of intraday reversals only supports the idea that this market can easily get pushed around right now.
That said, while the current conditions might favor shorter-term investors who have the ability to reposition rapidly, timing such moves is tricky to say the least. Oversold market conditions are by no means a guarantee of action in the opposite direction, and even should a relief rally occur, there’s no telling how long it will last. Specifically, the inability of this market to hold on to even the slightest of gains recently makes it exceedingly important for investors to book any gains and cut any losses quickly.
That said, longer-term investors still need to simply wait and bide their time while this market searches for a bottom. We have a long way to go before it will be time to even start thinking about building positions.
Friday, July 11, 2008
Free Newsletter: Stalking Stocks with the Shark - 07/10/2008 10:18 PM:
Free Newsletter: Stalking Stocks with the Shark - 07/10/2008 10:18 PM:
Greetings Shark Investors:
Although the market was able to recover some of the points it lost the previous day, the trip between the bells on Thursday was anything but smooth. Indications were for a positive start early in the morning as the index futures pointed to a slight rebound from Wednesday’s big losses, but sentiment got a big boost after WMT reported that June same store sales numbers came in well ahead of estimates and raised their second quarter guidance. However, even though there was little reaction to the weekly unemployment data – which showed a lower number of new application for unemployment benefits – the mood soured as we headed towards the opening bell as several apparel retailers reported that sales had declined last month. The implication is that consumers may be spending their rebate checks, but they’re getting spent on necessities.
As such, the market did start the day in positive territory, but the trading was quite choppy and directionless in the early going. While we did see a bit of a rebound in tech, industrials, materials and energy, former St. Louis Fed president Poole put renewed pressure on the financials after he said that FNM and FRE were “technically insolvent.” That said, even though consumer discretionary started weak and trended lower for the entire day, the rest of the sectors began to inch their way higher as we worked our way towards the New York lunch hour and into the early afternoon. However, about two hours before the close, the market quickly fell back to the lows of the day following a sudden spike in oil which had been precipitated by threats of increased violence in Nigeria. They didn’t stay at those levels for long, though, because the indices bounced right back up to finish the day with average gains of 0.82% on breadth that was just in positive territory and volume that was again lighter than it had been the previous day.
There were sure a lot of balls up in the air today, and as a result, it’s difficult to really pinpoint any one driver that had an outsized influence on the market. Certainly, oversold market conditions, the sudden spike in oil, very real concerns over FMN and FRE, and nervousness following Wednesday’s reversal of Tuesday’s gains all played a part, but sometimes the better approach is to simply take the new information that we gain and simply assimilate it rather than try to come up with some penetrating insight. There are plenty of issues that this market continues to wrestle with and no shortage of potential catalysts that could trigger a big swing one way or another.
Investors are obviously nervous and are hesitant not to lock in short-term gains. Certainly, given how many times folks have been burned chasing strength over the past several weeks, it shouldn’t be surprising to see this market have a hard time making much progress to the upside. There’s little doubt that it would take much to trigger a fresh leg lower, but at the same time, there are plenty of shorts out there who are sitting on some good gains, and a short-covering rally could pick up steam in an instant.
Right now, conditions are ripe for this market to go either way right now. However, the bottom line remains the same. We are in a downtrending market, and that means we need to maintain an aggressively defensive posture.
Greetings Shark Investors:
Although the market was able to recover some of the points it lost the previous day, the trip between the bells on Thursday was anything but smooth. Indications were for a positive start early in the morning as the index futures pointed to a slight rebound from Wednesday’s big losses, but sentiment got a big boost after WMT reported that June same store sales numbers came in well ahead of estimates and raised their second quarter guidance. However, even though there was little reaction to the weekly unemployment data – which showed a lower number of new application for unemployment benefits – the mood soured as we headed towards the opening bell as several apparel retailers reported that sales had declined last month. The implication is that consumers may be spending their rebate checks, but they’re getting spent on necessities.
As such, the market did start the day in positive territory, but the trading was quite choppy and directionless in the early going. While we did see a bit of a rebound in tech, industrials, materials and energy, former St. Louis Fed president Poole put renewed pressure on the financials after he said that FNM and FRE were “technically insolvent.” That said, even though consumer discretionary started weak and trended lower for the entire day, the rest of the sectors began to inch their way higher as we worked our way towards the New York lunch hour and into the early afternoon. However, about two hours before the close, the market quickly fell back to the lows of the day following a sudden spike in oil which had been precipitated by threats of increased violence in Nigeria. They didn’t stay at those levels for long, though, because the indices bounced right back up to finish the day with average gains of 0.82% on breadth that was just in positive territory and volume that was again lighter than it had been the previous day.
There were sure a lot of balls up in the air today, and as a result, it’s difficult to really pinpoint any one driver that had an outsized influence on the market. Certainly, oversold market conditions, the sudden spike in oil, very real concerns over FMN and FRE, and nervousness following Wednesday’s reversal of Tuesday’s gains all played a part, but sometimes the better approach is to simply take the new information that we gain and simply assimilate it rather than try to come up with some penetrating insight. There are plenty of issues that this market continues to wrestle with and no shortage of potential catalysts that could trigger a big swing one way or another.
Investors are obviously nervous and are hesitant not to lock in short-term gains. Certainly, given how many times folks have been burned chasing strength over the past several weeks, it shouldn’t be surprising to see this market have a hard time making much progress to the upside. There’s little doubt that it would take much to trigger a fresh leg lower, but at the same time, there are plenty of shorts out there who are sitting on some good gains, and a short-covering rally could pick up steam in an instant.
Right now, conditions are ripe for this market to go either way right now. However, the bottom line remains the same. We are in a downtrending market, and that means we need to maintain an aggressively defensive posture.
Thursday, July 10, 2008
Shark Investing - RevShark Podcast Notice
In this podcast, RevShark elaborates on the importance of the upcoming earnings season and describes how the market's reaction to these reports can be used to gauge short-term direction.
Visit: www.SharkInvesting.com and click on Shark Bites.
Visit: www.SharkInvesting.com and click on Shark Bites.
Free Newsletter: Stalking Stocks with the Shark - An Absolute Reversal - 7/9/08
Free Newsletter: Stalking Stocks with the Shark - An Absolute Reversal - 7/9/08
Greetings Shark Investors:
Just one day after stocks experienced the sort of oversold rally that just about every market participant had been waiting for, the averages reversed course, giving up all of the previous day’s gains and more. Although oil was trading a bit higher in the early going following news that Iran had test fired missiles capable of reaching Israel, indications were for a slightly higher start to Wednesday’s trading session as investors wondered if we would see the previous day’s rally would continue. Also boosting sentiment early on was news that AA had reported earnings that were in line with consensus estimates.
As such, the market did open in positive territory, but it was obvious from the get-go that we wouldn’t be seeing any immediate follow-through, because the areas of the market which had led on Tuesday – industrials, consumer discretionary, tech, and especially financials – saw some quick selling, while the sectors which had lagged – energy and materials – were leading. As such, the market spent the entire morning and early part of the afternoon hovering near the lows of the session with modest losses.
However, just about two hours before the close, a fresh wave of selling hit, sending each of the major sectors – save utilities which remained steadily in positive territory as investors sought the stability of their dividend yields – as well as the indices, sharply lower. From that point and until the end of the day, just about the entire market sold off in a move reminiscent of the session last week in which no area of the market was left unscathed. Given the fact that each instance of strength we’ve seen over the past several weeks has quickly sputtered out, it’s not at all surprising that Tuesday’s oversold bounce failed – it's just remarkable that it did so in such a absolute manner the very next day.
We’ve been mentioning that the recent oversold conditions have increased the chances that we would see some sort of reflexive rally, but the lack of any real panicked selling hadn’t really set us up for the kind of counter-trend bounce we saw back in March and May. The fact that we hadn’t had a really good washout meant that there were likely plenty of folks sitting on losses who would be ready to sell into any strength. Once it became obvious that yesterday’s rally wasn’t going to continue, a little profit-taking turned into a full-fledged reversal.
Unfortunately, the bottom line remains the same, and we've been repeating it now for several months. This market is in a primary downtrend, and as such any action to the upside simply can not be trusted to last. We will certainly be presented with some opportunities for some quick trades as this turmoil plays out, but it’s simply pointless to even think about building longer-term positions until the pricing action proves there’s been a real change in this market’s character.
Tuesday, July 8, 2008
Free Newsletter: Stalking Stocks with the Shark Market Stumbles Into the New Week - 7/7/08
Free Newsletter: Stalking Stocks with the Shark Market Stumbles Into the New Week - 7/7/08
Greetings Shark Investors:
Although the market kicked off the new week on a positive note, a handful of sudden, swift intraday swings once again prevented any sort of oversold bounce from taking shape. Given the poor action over the past several trading sessions as well as a continued improvement in the U.S. dollar and a pullback in crude prices, it wasn’t too surprising to see that indications were for a slightly higher open to the day.
Still, while the averages started the trading session in positive territory, the market wasn’t able to make much progress as the morning developed. Whatever buying interest that existed in the first few hours was concentrated in the sectors which had experienced the most pain recently – industrials, materials and technology – but financials lagged badly, and even though oil was down almost 4% at one point, energy was also notably lower.
Regardless, it was possible that if the market was able to hold on to its early gains, others might begin to put themselves in a better position to catch a more vigorous bounce if it happened to develop. Unfortunately for the bulls, however, they weren’t able to find that out, because as we worked our way through the New York lunch hour, news that FNM and FRE could be required to raise as much as $75 billion in new capital resulting from an accounting standards change triggered a wave of selling that sent those two stocks, the financials, and the averages well into negative territory.
While the action did stabilize shortly thereafter, the market spent the better part of the afternoon struggling near the lows of the session. However, stocks reversed course once again as we headed into the final hour, but just as it looked like the indices might be able to salvage an ugly afternoon and squeak through to the finish with slight gains, the selling pressures picked up yet again just before the closing bell. By the end of the day, the indices, on average, lost just under 0.5% on breadth that was right around 2:1 to the negative.
Granted, At the same time, however, this is the exact sort of action – an unrelenting and steady drip lower – that might begin to dampen the spirits of even the most ardent of market players who are holding desperately on to the hope that this downtrend will be over just as soon as sellers realize things really aren’t all that bad. Be that as it may, we often say that a true market bottom won’t come until there is no place for investors to hide their capital and no one wants anything at all to do with the stock market.
Judging from the recent action, it certainly looks as if more and more market participants are becoming discouraged, but that in and of itself is no guarantee that we are on the cusp of a fundamental change in this market’s character. Nor does it mean that investors should be starting to anticipate one either.
The bottom line is that this market is as tricky as ever to navigate, and the big question is how to deal with it. While current conditions suggest slightly different approaches depending on various time-frames and styles, the one thing that everyone needs to keep in mind is that this market is – and has been – in a primary downtrend, and that should be the guiding principle behind any decisions we make or actions we take.
Greetings Shark Investors:
Although the market kicked off the new week on a positive note, a handful of sudden, swift intraday swings once again prevented any sort of oversold bounce from taking shape. Given the poor action over the past several trading sessions as well as a continued improvement in the U.S. dollar and a pullback in crude prices, it wasn’t too surprising to see that indications were for a slightly higher open to the day.
Still, while the averages started the trading session in positive territory, the market wasn’t able to make much progress as the morning developed. Whatever buying interest that existed in the first few hours was concentrated in the sectors which had experienced the most pain recently – industrials, materials and technology – but financials lagged badly, and even though oil was down almost 4% at one point, energy was also notably lower.
Regardless, it was possible that if the market was able to hold on to its early gains, others might begin to put themselves in a better position to catch a more vigorous bounce if it happened to develop. Unfortunately for the bulls, however, they weren’t able to find that out, because as we worked our way through the New York lunch hour, news that FNM and FRE could be required to raise as much as $75 billion in new capital resulting from an accounting standards change triggered a wave of selling that sent those two stocks, the financials, and the averages well into negative territory.
While the action did stabilize shortly thereafter, the market spent the better part of the afternoon struggling near the lows of the session. However, stocks reversed course once again as we headed into the final hour, but just as it looked like the indices might be able to salvage an ugly afternoon and squeak through to the finish with slight gains, the selling pressures picked up yet again just before the closing bell. By the end of the day, the indices, on average, lost just under 0.5% on breadth that was right around 2:1 to the negative.
Granted, At the same time, however, this is the exact sort of action – an unrelenting and steady drip lower – that might begin to dampen the spirits of even the most ardent of market players who are holding desperately on to the hope that this downtrend will be over just as soon as sellers realize things really aren’t all that bad. Be that as it may, we often say that a true market bottom won’t come until there is no place for investors to hide their capital and no one wants anything at all to do with the stock market.
Judging from the recent action, it certainly looks as if more and more market participants are becoming discouraged, but that in and of itself is no guarantee that we are on the cusp of a fundamental change in this market’s character. Nor does it mean that investors should be starting to anticipate one either.
The bottom line is that this market is as tricky as ever to navigate, and the big question is how to deal with it. While current conditions suggest slightly different approaches depending on various time-frames and styles, the one thing that everyone needs to keep in mind is that this market is – and has been – in a primary downtrend, and that should be the guiding principle behind any decisions we make or actions we take.
Monday, July 7, 2008
Free Newsletter: Stalking Stocks with the Shark - Action Subdued Ahead of Long Weekend - 07/6/08
Free Newsletter: Stalking Stocks with the Shark - Action Subdued Ahead of Long Weekend - 07/6/08
Greetings Shark Investors:
Although there was a pretty good possibility that we would see some fireworks a day early, Thursday instead turned out to be a typically quiet pre-holiday trading session. Followed the previous day horrible action into the close in which no area of the market escaped unscathed, indications were for a flat start to the day. We mentioned in our last Stalking Stocks newsletter that part of Wednesday’s late day sell-off could have been due to nervousness ahead of key economic events early in the morning. The first bit of news the market was expecting in the morning was the interest rate decision from the ECB. Recall that over the past several months, Jean-Claude Trichet and Ben Bernanke have been upping their rhetoric in regards to inflation, but when the Fed last met, not only did they not hike interest rates to combat inflation, they also disappointed many who were hoping that they would at least help support a flagging U.S. dollar by adopting a more hawkish tone in the policy statement.
At the same time, however, investors fully expected that the ECB would raise rates in the morning, and that has been reflected over the past few days as the euro traded to just under overhead resistance levels. While investors did unwind some of those positions into the news, it wasn’t until Trichet said that the ECB would have no “bias” in their monetary policy moving forward that the euro really started to lose ground.
The second bit of data was the much anticipated monthly jobs report. Recall that the market sold of sharply after last month’s report showed that the unemployment rate had jumped by a surprising half percentage point to 5.5%, and although expectations were that the headline number would show a relatively benign 60,000 jobs lost, market players were obviously worried that this month’s report might hold more bombshells. However, the actual number, 62,000, was essentially in-line with estimates.
So, even though many market players were braced for the worst, a lack of any major blow-ups or surprises helped the indices start the session off in positive territory. But if anyone was looking for the much-anticipated relief rally to take hold, they were likely disappointed, because after a couple of quick whipsaws in the first 45 minutes or so, the averages settled down in to a tight range for the reminder of the abbreviated trading session, finishing the day in mixed territory. Looking at the leader/laggard relationship, it wasn’t too surprising to see that industrials and consumer discretionary bounce a bit after the absolute drubbing they’ve taken recently or that financials were once again weak. What was interesting, however, was to see energy-related names show weakness despite the fact that crude traded near record highs for most of the session.
Regardless, trying too hard to find much meaning in Friday’s trade is a waste of time. The data in the morning gave us a few more pieces of the puzzle, but the action in between the bells was nothing more than a typically thin, lackluster holiday session. The one thing we do know, however, is that this market remains badly broken, and right now, accepting that the trend is down is the best way to approach things. Ultimately, there will be tremendous opportunities in this market, but until that actually happens and stocks begin to trend higher, individual investors are better off leaving the bottom-fishing to those who are required to be fully invested in a market that keeps moving lower.
Greetings Shark Investors:
Although there was a pretty good possibility that we would see some fireworks a day early, Thursday instead turned out to be a typically quiet pre-holiday trading session. Followed the previous day horrible action into the close in which no area of the market escaped unscathed, indications were for a flat start to the day. We mentioned in our last Stalking Stocks newsletter that part of Wednesday’s late day sell-off could have been due to nervousness ahead of key economic events early in the morning. The first bit of news the market was expecting in the morning was the interest rate decision from the ECB. Recall that over the past several months, Jean-Claude Trichet and Ben Bernanke have been upping their rhetoric in regards to inflation, but when the Fed last met, not only did they not hike interest rates to combat inflation, they also disappointed many who were hoping that they would at least help support a flagging U.S. dollar by adopting a more hawkish tone in the policy statement.
At the same time, however, investors fully expected that the ECB would raise rates in the morning, and that has been reflected over the past few days as the euro traded to just under overhead resistance levels. While investors did unwind some of those positions into the news, it wasn’t until Trichet said that the ECB would have no “bias” in their monetary policy moving forward that the euro really started to lose ground.
The second bit of data was the much anticipated monthly jobs report. Recall that the market sold of sharply after last month’s report showed that the unemployment rate had jumped by a surprising half percentage point to 5.5%, and although expectations were that the headline number would show a relatively benign 60,000 jobs lost, market players were obviously worried that this month’s report might hold more bombshells. However, the actual number, 62,000, was essentially in-line with estimates.
So, even though many market players were braced for the worst, a lack of any major blow-ups or surprises helped the indices start the session off in positive territory. But if anyone was looking for the much-anticipated relief rally to take hold, they were likely disappointed, because after a couple of quick whipsaws in the first 45 minutes or so, the averages settled down in to a tight range for the reminder of the abbreviated trading session, finishing the day in mixed territory. Looking at the leader/laggard relationship, it wasn’t too surprising to see that industrials and consumer discretionary bounce a bit after the absolute drubbing they’ve taken recently or that financials were once again weak. What was interesting, however, was to see energy-related names show weakness despite the fact that crude traded near record highs for most of the session.
Regardless, trying too hard to find much meaning in Friday’s trade is a waste of time. The data in the morning gave us a few more pieces of the puzzle, but the action in between the bells was nothing more than a typically thin, lackluster holiday session. The one thing we do know, however, is that this market remains badly broken, and right now, accepting that the trend is down is the best way to approach things. Ultimately, there will be tremendous opportunities in this market, but until that actually happens and stocks begin to trend higher, individual investors are better off leaving the bottom-fishing to those who are required to be fully invested in a market that keeps moving lower.
Thursday, July 3, 2008
Free Pod Cast Update
In this Shark Bites Pod Cast, RevShark provides advice on how the individual investor should approach a downturn. Does the Shark think now is the time to begin nibbling on the market? Visit: http://www.sharkinvesting.com/ and Click on Shark Bites.
Wednesday, July 2, 2008
Tuesday, July 1, 2008
Free Newsletter: Stalking Stocks with the Shark Stocks Limp Into End of Quarter - 6/30/08
Free Newsletter: Stalking Stocks with the Shark Stocks Limp Into End of Quarter - 6/30/08
Greetings Shark Investors:
Although stocks were able to recover from a shaky start, the major indices closed out Monday’s trading session in a lackluster fashion as high oil prices and poor action in the financials once again conspired to keep pressure on the broader market. The news wires were especially quiet in the morning as we kicked off the new week and the last day of the second quarter, but with oil once again spiking more than $2 to over $142 a barrel, it wasn’t too surprising to see the index futures pointing lower early in the morning.
The futures were able to improve a bit as the opening bell approached, but even though the market did start the day with modest gains, any initial buying was to be short-lived. However, we moved to what would turn out to be the lows of the morning shortly after the Chicago Purchasing Manager’s Index – which is a measure of manufacturing activity in the Chicago Fed District – came in. While it did continue to indicate a contraction, the headline and well as the prices paid ad employment components all exceeded expectations.
Despite that disappointing reaction, stocks turned higher mid-morning, mostly on sharp turn-arounds in consumer discretionary, tech and industrials. However, even though the market was sporting modest gains as we worked our way through the New York lunch hour, any progress to the upside failed to gain much traction. As we entered the afternoon, a sudden wave of selling – which coincided with reports that rumors of a possible “take under” of LEH had been swirling – pushed the averages well of the highs of the session. Finally, even though the market was able to improve slightly as we headed towards the end of the day, a last push downward ensured a very disappointing and weak close to a rather lackluster trading session.
All in all, it was probably better that we didn’t see more of a bounce on Monday as the action did little to relieve the oversold market conditions, leaving us with the possibility that some sort of bounce will give this market some relief as the second half of the year gets under way, However, as we’ve been pointing out, the drops over the past six trading sessions may have been precipitous, but at no point did the selling reach panicked levels, which suggests that downward pressures have yet to be exhausted. The implication is that there are plenty of folks who haven’t been selling into this, and will likely take the opportunity to sell into strength when the relief rally that just about everybody and their brother is anticipating actually occurs.
Certainly, that bounce is all but inevitable, but the current level of doom and gloom will make it all the more difficult to deal with. For those who attempt to play it, the trick will be to make sure they don’t give in to the hope that suddenly we have clear skies ahead. However, for most individual investors, the best thing to do right now is sit tight in cash and ignore all those market pundits who would tell us that we need to be buying stocks that are losing money in a market that is trending lower.
Greetings Shark Investors:
Although stocks were able to recover from a shaky start, the major indices closed out Monday’s trading session in a lackluster fashion as high oil prices and poor action in the financials once again conspired to keep pressure on the broader market. The news wires were especially quiet in the morning as we kicked off the new week and the last day of the second quarter, but with oil once again spiking more than $2 to over $142 a barrel, it wasn’t too surprising to see the index futures pointing lower early in the morning.
The futures were able to improve a bit as the opening bell approached, but even though the market did start the day with modest gains, any initial buying was to be short-lived. However, we moved to what would turn out to be the lows of the morning shortly after the Chicago Purchasing Manager’s Index – which is a measure of manufacturing activity in the Chicago Fed District – came in. While it did continue to indicate a contraction, the headline and well as the prices paid ad employment components all exceeded expectations.
Despite that disappointing reaction, stocks turned higher mid-morning, mostly on sharp turn-arounds in consumer discretionary, tech and industrials. However, even though the market was sporting modest gains as we worked our way through the New York lunch hour, any progress to the upside failed to gain much traction. As we entered the afternoon, a sudden wave of selling – which coincided with reports that rumors of a possible “take under” of LEH had been swirling – pushed the averages well of the highs of the session. Finally, even though the market was able to improve slightly as we headed towards the end of the day, a last push downward ensured a very disappointing and weak close to a rather lackluster trading session.
All in all, it was probably better that we didn’t see more of a bounce on Monday as the action did little to relieve the oversold market conditions, leaving us with the possibility that some sort of bounce will give this market some relief as the second half of the year gets under way, However, as we’ve been pointing out, the drops over the past six trading sessions may have been precipitous, but at no point did the selling reach panicked levels, which suggests that downward pressures have yet to be exhausted. The implication is that there are plenty of folks who haven’t been selling into this, and will likely take the opportunity to sell into strength when the relief rally that just about everybody and their brother is anticipating actually occurs.
Certainly, that bounce is all but inevitable, but the current level of doom and gloom will make it all the more difficult to deal with. For those who attempt to play it, the trick will be to make sure they don’t give in to the hope that suddenly we have clear skies ahead. However, for most individual investors, the best thing to do right now is sit tight in cash and ignore all those market pundits who would tell us that we need to be buying stocks that are losing money in a market that is trending lower.
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James “ RevShark ” DePorre is widely viewed as one of the nation's top stock market investment advisors. A self-made multimillionaire, he is president of both Shark Asset Management, Inc., and Shark Investing Inc., and has been a featured writer for Jim Cramer's TheStreet.com and RealMoney.com since 2001. A pioneer in educating investors online, DePorre joined Herb Greenberg in 1995 to found AOL's The Shark Attack trading site, which quickly became a premier destination for serious traders. In 1999 he founded Shark Investing, which has evolved from its chat room roots into a full service educational and financial content website.