Market View: If You Believe The Dow Low Will Hold, PFE
July 29, 2008 12:44 AM
If you believe the Dow low will hold, and would rather not simply buy an ETF to mimic the index, then a stock worth looking at on further weakness may be Pfizer (PFE). The chart looks a bit better than many (it is almost impossible to find ANY chart that looks good right now) although it did reject the recent high of $19.25. keep in mind, the chart would look FAR better if it did not reject that high. But virtually all charts look very ugly right now - so if long, pick your medicine.
Therefore, do not chase strength on this at all. Weakness is likely to hold just under $18 - if the Dow low holds, that is. In addition, the stock will bring a 7% dividend yield on any weakness. I would have to look more into the balance sheet to know if there is ANY chance of this being cut, but if not, this pays far more than the 10 year treasury at 4%.
Looking To Be Long Energy? MTW
July 29, 2008 12:10 AM
I have harshly been critical of being long anything related to energy for far over a month and the market has proven my views correct, thus far, with a huge sell-off in energy related stocks. The energy ETF XLE has fallen 20% in 3 weeks, so my call on that sector has done well.
If you are looking to be long something energy related, Manitowoc (MTW) appears to be long after earnings- at some point. The PE is very low, but more importantly guidance was solid and we have chart confirmation to be long above $25.37. Unfortunately, it is likely to gap a bit higher at the open. If it gaps, watch the early high to make sure you aren’t buying into a reversal as a key SMA is near the likely open. But if you want to be long the space to hedge your bets on energy, MTW seems to be long here. I see no issues with the chart well into the $40 area. Therefore, I suspect it will attempt that area at some point.
Keep in mind, it could be tough sledding near term as the SMA’s are clearly pointed down. While I am not a huge follower of them, some people are. It could reject the $35 area and check down. If it stays above $32 range for several days and does reject an area first, then the trade will likely be long check-downs. I would rather wait until the reaction after earnings can be seen to be safe. But watching it intraday may solve that concern.
Keep in mind that I think the overall outlook on energy related stocks is a rotation out of them, in general. So it is unlikely there will be a hurry here, but not certain. What I am saying is “if” you like the sector and you disagree with my take on the sector in general, MTW is worth a hard look here.
Update: MTW reversed at the open and is an avoid until further notice, IMO. This is why I mentioned the safe play was to either wait, or watch the intraday open. It wasn’t good.
07/29 Close Update: My call to avoid it as the open was clearly sold was correct as it fell the rest of the day. I made the call within about 30 mins of the open and the stock was about $29 or so. It closed at $27.43. I understand that the sentiment is clearly negative on energy, but WLT rallying and MTW falling, makes no sense at all. MTW gave solid guidance, has a 7 PE and WLT has a PE in bubble territory. But I have long mentioned, if you think the markets are “efficient and rational” as taught in college, you would be strongly mistaken.
Earnings: WLT Beats After Hours - Avoid Chasing
July 28, 2008 11:30 PM
Walter Industries soundly beat estimates after hours with earnings of $.94 a share. That is a huge number compared to the consensus of $.57. My first question is how ridiculous the so called well trained analysts are. If there was ANY chance of them rolling in with 57 cents a share the stock would have been halved overnight. Obviously the market knew there was almost no chance of that happening.
At any rate, there is no clarity on WLT for a variety of reasons. The chart clearly says avoid strength below $111.99 and $103.90. In addition, are these earnings likely to continue to accelerate if coal prices go flat to down? I do not know enough about their business, so I can not logically comment. However, it seems to me that long term coal (and energy prices in general) must go lower, as I have long held. Either prices fall because of a weakening economy or they fall because higher prices cause a weak economy. I see no other possible outcome. Cramer will likely be blowing his bull horn on WLT after earnings, but haven’t watched it ( I rarely ever do). But it is an avoid much higher, IMO.
In addition, I view coal as exceptionally vulnerable to alternative energy - far more than oil. This is because it is primarily used to generate electricity. Major wind generation power is coming, along with the possibility of nuclear. If the run in coal isn’t over, it likely soon will be. I would not be a long term investor in anything coal related. Wind and nuclear is likely 2-3 years out, possibly longer, but one or the other or both is coming eventually.
07/29 Close Update: Well, the size of the move surprised me. The fact that it rallied did not as the open was clearly bought. I still say extreme caution much higher near the numbers posted as that was the intent of this post to begin with. I just didn’t think it would make it near $100 in 1 day. Today’s 15% spike to $99.26 makes it appear that i am wrong on this stock. Perhaps I am. But I am leaving this view up as I still believe it is correct and I do not want to be confused with a Monday Morning QB. We will see soon enough.
Stock Watch: GOOG Competitor? Cuil
July 28, 2008 10:52 PM
Former employees of Google have launched what may prove to be the stongest bid yet to make serious inroads into GOOG’s strength - search. The company is named Cuil and is pronounced “cool”. They claim to be a far superior search than GOOG in both pages indexed and quality of output (this begs the question why MSFT cannot do this, but that’s another topic). They claim that they will index 120 billion web pages. The last count of GOOG’s index was just over 8 billion, but they will not disclose how many pages they index currently.
An article on Cuil can be read on CNN Money by clicking HERE.
If any of this pans out, GOOG investors are likely to get very nervous, but that is way too early to know. GOOG clearly is the king of search. My concern - long term - is even is Cuil is not the answer, there will be more comers. Someone will eventually make an inroad, most likely. The chart clearly says avoid it anyhow for now. But longer term, this could be an issue if another player takes significant share. I would personally run from GOOG stock as the chart clearly says avoid. Long term, who knows.
Cuil’s site is: Here
My Views: Clarity And Agreement
July 28, 2008 9:40 PM
I have mentioned many times that I believe that supply and demand at different price points drives the markets - nothing more. It is no different than any market of any nature. The only difficulty is trying to determine where there is more demand that supply and vice-versa. In addition, that demand/supply curve can radically change based on news - so it can be a moving target.
This is why I believe in something I refer to as “clarity and agreement”. This is where the direction is clear and there appears to be agreement as to where the buyers or sellers are. If there is ambiguity, then do not bother with it.
Let’s examine some recent stock moves.
MRK: The stock made a gap down on 07/22 and the gap was clearly sold. Then, it proceeded slightly higher the next few days. Is this clarity or agreement? No. If you believe in my philosophy, you should not be long the stock under any circumstance’s in this range.
AAPL: This is more difficult. We had a gap down that was bought. I had even mentioned near the open of the gap down day that the open low was bought and “traders are likely to be long above it”. It proceeded to rally higher the remainder of the day and the shorts got crushed. The problem is going forward. On one hand we have a gap down. On the other hand, the gap was bought. Therefore, there is some ambiguity there, obviously. However, there is likely to be some agreement that the 07/22 low needs to hold. Therefore, once again, I expect traders to try and hold that low and will likely be long above it.
GOOG: Why anyone would buy GOOG after a gap down was clearly sold is beyond me. Remember my views on RIMM after the gap down was sold? I rather harshly stated that “anyone long here is a complete moron”after Cramer came out and said to buy RIMM “it just had a bad day”. Well, the GOOG gap was sold, and being long strength was just as moronic, in my estimation. There was clarity and agreement on GOOG, IMO, and that was to be short the stock on any strength. Compare this to the gap higher in April. The gap higher was bought. There was complete clarity and agreement - LONG.
IBM: I mentioned back on 07/02 I believe, that “if you just had to be long something” the trade was long IBM above the 07/01 low. Why? Because we had what appeared to be some agreement on a low, and no agreement - ever - on a high. Therefore, there was only one trade and that was long. If there was some agreement previously on a high, then the stock may have traded in a tight range until one cleared. But that was not the case with IBM., just saying “if”.
I hope I have provided some insight into what I view as “clarity and agreement”, as I believe it is important. Look for what YOU believe and see as clarity and market agreement and I believe the probability of being correct is far greater. Any opinion I give, I look for both. If I do not see it, then why bother with it. Move on to something else - or nothing at all.
Market Recap: My Skepticism Proves Correct
July 28, 2008 9:23 PM
I have no been much help the last 2 weeks as I simply did not believe in the rally. I strongly suspected it was a short covering rally due to the financials earnings that were above “depression” levels and the emergency rule put in place to stop naked shorting of the large financials. Could the move kept going? Yes. Anything is always possible. But without firm lows in the SP I just did not think the move was “justified”. In addition, if and when the market turned, where was the low? There was no rejection of a low on the SP, so a “probable” buy point did not exist. Why did the market close at the low of the day today? What was there to stop it? Nothing, as I have mentioned. Therefore, I just hard to wait it out and look like a dummy until proven otherwise. It does get frustrating as I created the site to “maybe” provide some insight as to what appears to be going on, and then the market makes a big move that I considered completely irrational.
With all said, where now? I mentioned last week, if we had seen the lows ( I still believe otherwise) then the SP should try and reverse above the Dow low. I still believe that is likely the case. If it does, then that could provide at least an intermediate low. I still believe the SP needs to clearly reject a new low to have any confidence here longer term. But we should get an attempt to hold the line not much further below.
This market still strongly smells like a meltdown type of market where a capitulation low never happens, just failed rallies with lower lows and lower highs. AKA “the 70’s”. Something I have referred to many times as “bullfrogging”.
Flat Open 07/22 Low Is Still Key
July 28, 2008 9:35 AM
It looks like the 07/22 low is still key here. It held Friday with a low of 1251. No news, we may be in a tight range today, not certain. Once again, oil direction may be key. If we hold those lows, i really see nothing up top that will cause issues other than timing. The sma’s are not far above.
Fox Business: Weekends Worth A Look
July 27, 2008 10:14 PM
Not long ago I gave a very harsh opinion of the new Fox Business channel. While my view of that has not changed for their “market hours” cast, their weekend shows are very good. I have been watching Elizabeth Macdonald this evening and she rocks. She was firing up Congressmen in a big way about the Housing Bill. I LOVE anyone that tells it like it is. I do completely agree with her that the Housing Bill will be a massive taxpayer bailout beyond any figure discussed by a large magnitude, but that’s a different topic.
Dave Ramsey is also on there. He seems like a very compassionate guy, but I need to hear more of him to have an opinion. He is a male Suzie Orman, apparently. He does say what he thinks - so I like him also, regardless of whether I agree or not. His advice today to a homeowner in Phoenix to not short sale his home, that values were likely to come back in two years I found shockingly inaccurate - so my thoughts of him as a bright guy trying to help people was kind of popped with that comment. A simple history lesson of housing bubbles, not to mention statistical fact regarding median incomes, strongly suggest that the peak will not be reached again for at LEAST 7 years, probably far longer. Regardless, he is worth listening to. I respect anyone that attempts to help the “Average Joe”, probably because I grew up in a blue collar family, and know the average family needs real advice. Probably the main reason I started this site - to see if I could provide a different opinion than all the Talking Heads on TV.
The problem with Fox Business is their weekday cast and the entire way they attempt to provide market insight while the markets are open. David Asman just has to go. He seems like a nice guy, but it is clearly not a fit for a business channel, in my estimation. Neil Cacuto is marginal, at best. And they clearly need a new “take” on how to do the show during market hours.
If I were “running the show” they would 100% completely change direction. What they should do is spend time for “in depth” looks at individual stocks, like balance sheets, revenues, etc. and have unbiased experts (not Wall St. analysts), go over the stocks. Or something of that nature, to differentiate themselves from CNBC. They are attempting to appeal to the ”average investor” and therefore have their laid back approach. I believe this is a mistake. The average investor wants REAL advice, not dumbing down to their supposed level. They are tired of getting slammed by Wall St. and do not know who to believe. That is how the network should be run, IMO.
But I do like their lineup of shows on the weekend.
MRK: Avoid Value Trap
July 27, 2008 8:20 PM
On 07/22, Merck (MRK) gapped lower and has since risen slightly. In fact, it has slightly exceeded the gap down high. There is no clear indication of a low and the gap “might” fill all the way, or it may reverse prior to the fill. Some may be confused as to whether this gap was bought, or sold. This gap was sold and is an avoid anything long, IMO.
It is clearly a short below $38.34, but I would be very surprised if it even comes close to that area before falling back. I am not saying it is a flat out short, as if it goes higher, some shorts may cover. However, you clearly cannot be long it with no clear reference point, IMO.
Remember my motto: clarity and agreement. We have neither on this stock as it is rising after a gap that was sold. Therefore, it is an avoid.
Market Direction: Not Certain
July 27, 2008 1:09 PM
There are still a ton of earnings releases the next two weeks. Considering that the market has largely ignored any and all negative outlooks from most all companies, I am not certain of the direction. I still remain exceptionally skeptical, but we will see.
If you recall, the last time the market rallied two plus months ago I mentioned several times (before it fell) that “the market is so optimistic, it is scary”. It was ignoring any and all data and just kept marching higher. Well, we ultimately saw the result of that.
Personally, I would still like to see a firm low in the SP. But so would virtually everyone. That is probably why it has not happened.
On Monday, there is no economic data being released. Therefore, it will probably move on earnings and possibly oil, once again. The data picks up late in the week. In addition, the “no naked shorting” of the 19 large financials is scheduled to end on July 29th, unless extended. I suspect it may well be extended. The President will likely sign the Housing Bill this week and that may provide some temporary “euphoria” that the housing problem has seen a bottom. While this will help, I highly doubt it will resolve the issue.
Tradestalker had 1292-1293 on the futures as “major” resistance. It hit it on Wednesday before dramatically falling back. I still cannot figure out how and why he makes those calls in areas not seen in a long while, but apparently he has his methods.
Open Update: Well, the market seems uncertain as well as the futures are completely flat 10 mins before the open.
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Recent Commentary
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