In this market, the best defense right now is to go offensive on things that are hurting this market. Contradictory? No! By following many news headline and comments from the financial web sites lately, you'd come up with a sense that this market is heading lower, much lower. This indeed is putting a lot of traders into a cautionary stance with respect to this market. However, when you look at the action from many of our plays on our watchlist, you'd have a different feeling all together. No, we don't have a secret list or a "Glengarry Glen Ross" list, every play on our Shadowlist is now well known in the trading community. We just happen to pick those plays out early and compile them into a trading list. Recent unknown names including PCX, ANR, CMP have become darlings to the trading community. You have to understand, many of the plays on our list is the reason why the economy is hurting. The increasing raw cost of goods is driving up inflation and price increase is being passed along at every level, and ultimately at the consumers' end. If consumers refuse to spend or spend less, then there goes those profit projection of many well known public companies.
How about that block trade of MA at the end eh? Is that a paint or is that a paint and a half? In any case, we know now that there's someone willing to chase plays like MA at that level with that kind of money. The point is that stock market will always exaggerate even our wildest expectation. Basically, what we mean is that when a stock or a sector has a good story behind it, do not ever underestimate the power of those money chasing it. As of this moment, we can say that no analyst in this world has a true price projection for any of our coal plays, or steel or most other plays we currently cover. For analysts from MS or FBR to be bullish on plays like PCX, ANR yesterday is no different than us getting bullish on these plays two months ago. Frankly, we thought some of these commodity plays would be done by now, price action wise. Obviously, someone else has different ideas!. There are dozens of upgrades a day and we don't give the majority a second look, we definitely don't put them in the Journal unless we feel there could be an effect, as we did yesterday with the coals. Unfortunately, this action might have given these names a toppy feeling. This was a 3rd big day out of the last 4 trading days.
We haven't really added any different variety of plays to our list in a while and there's a reason we`re not doing so. Simple.. Why mess with it? Many plays on our list are still getting a 10% gain on a weekly basis and if you happen to catch a couple of nice dips, the gains might be even more. The bottom line, avoid the beaten down stocks! Although we are watching many index weighing stocks and financial stocks, we are only monitoring them to gauge the direction of overall market movement. If index weighing stocks do get more troublesome, you'd be sure that it will spread out to other sectors as well. In that case, we'd expect to be in full "buy on dip" mode very soon afterwards. This was the first trading week of June and it's starting out with a pretty lousy day. For now, index`s such as (NDX, IWM) level held, but we'd be eyeing the days low on the majors as a potential trigger for further downside follow through. At the end of the day, we are sitting with large percent of cash on hand, most likely we'll be very nimble for the rest of this week until the Job report. As we`ve noted recently,...
This holds true more now as we started to see noise come out of the U.K system premarket. Later in the day we got a S& P credit rating downgrade of financials. (LEH MER MS BAC JPM). What`s next, who`s next ....hhhmmm