DJIM #20 2008
Monday, May 19, 2008 at 01:05PM Unreal, unbelievable run.... Just to think that we were actually dealing with a Bear Stearn crisis as little as two months ago simply makes any trader speechless these days. We just couldn't think of any other working environment that gives you this kind of dynamics in such a short time. Sure, we can't compare apples to potatoes but we are sure most of you can understand what we go through doing this gig. So market goes from hell to paradise in 3 months? You better believe it! Ok, it isn't exactly like that! When we look at the market these days, we are still seeing a lot of troubling sector and believe us, many stocks are still in the "avoid at all cost" category. So why is this market so rosy all of a sudden? One reason we felt that's legitimate is that many market participants are still very bearish about this market. There's simply too much money on the sideline for those who have a bearish view. However, when you see the market going up every week and refuse to come down, even the most dedicated bears or cash neutral players would be tempted to get back in on the long side, perhaps with just one foot! This is enough! When market data is showing that we are NOT going into a full blown recession mode, everything that has been discounted to that effect earlier is no longer valid. It's true that we may still see economy worsening and roll into recession, but the market participants don't care at this moment. With the way the market behaves these days, you can literally be up 10% in a very short time even for a huge fund! So why not buy up this market, eh? The other reason for this unstoppable bull move is commodity! Yes, this has been a money making, profit grinding sector for DJIM and probably all of the DJIM readers. We were very adamant on this sector a couple of months ago and we are still pounding on all of the plays today. As we recall, a couple of months ago we said this is gonna be the year of commodity. As of now, we think this is gonna be a year of commodity that most of us will remember for a long long time! Perhaps, someone will call this a bubble year for all commodities. However, we think unlike the bubble years of technology and housing, commodities are very different in nature. Many of us have never experienced a prolonged inflationary period but maybe we are at the beginning of one? Of course, we can't jump into that kind of a conclusion yet but believe us, anything is possible when it comes to this market.
Now some sectors in review...
Shippers, with EXM earning out of the way and DRYS set to report AH, we feel this sector is desperately in need of a pullback. The further it moves up without a healthy pause, the more likely the group can take some beating on the next pullback. We'd love to get back into some with sizes on dips though. At the moment, the risk/reward is only good if we do intraday flips.
Solars, enough is enough, already! Lol Ok, it seems it's never enough for these solars! Our favorites have changed recently SOL CSIQ ENER... are just behaving like wild animals and we'd concentrate on these names. At this point, there's no technical setup and the only spirit out there when comes to the solar sector is buy as many as you can! Ok, again, we like pullbacks in this group and otherwise we'd only resort to day trades.
Coals, it seems this is the only commodity group that actually trades in a proper manner. Also, this is the most under hyped commodity group out there. Our most recent add-ons to the group have been incredible led by PCX and ANR We like its steady pace and this is the group which we don't mind adding on strength for a longer term hold.
Oil, any dip is a buy until the thing hits $145, which is cloe to Goldman's new target price. As much as we hate this fact, it seems "cheap oil" is going to be nothing but a pipe dream from now on.
Steel, this is the same story as other commodity and price power is the main driving force here. We like X, , MTL, SCHN the most but we also like the
Bottom line here, stick with the plays that work and don't wander off to other area. This is still very much a commodity story.
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We've had a major reversal since preparing this mid-day as aggressive profit taking took place. Many here were probably oblivious or didn't care what the market did in the afternoon as our consecutive alerts on CPSL from last Friday saw it not only gap, but explode further, up to 40%. We'd look for an aggressive pullback to buy back. As far as the market pullback, we all saw a similiar one last Wednesday, but considering this one is now the second one is the last 4 trading days, we'd be a little more cautious and think maybe the market needs more than a day cool down like last week. Jumping back in as quickly as last week may have to wait a little longer. Still..everything holds as to what we'd concentrate on and unless we get break say 1415 on the SPX/ 12893 DJIA, we wouldn't worry too much. Consider all these spirals an opportunity to get back some names you like sooner than later.