Two different market...
Nope, we are not talking about two markets in different geographical locations here. Lets face it, we have one market here that's been running in total bull mode and the other one that's basically in complete disarray. The bull market is obviously the commodity market. This is the market where the sky is the limit it seems. There's no need to fear to buy on dips or on strength. Chances are, a week or two later, the price will be much higher than you bought it for. The other market, which is centred around the credit crisis and is now spiraling out into the rest of the economy. Everything that's not commodity related, basically belongs to the other market and things are looking just bleaker by the day. As a trader, there's this thought constantly running through your mind every day. How much stronger is this commodity market going to get and how much weaker the other market is going to get? Well, it seems things are definitely running in opposite direction between these two market. Commodity prices just keep inching higher and the new 52 week high list is dominated by resource stocks on a daily basis. On the other hand, we have more write downs and guide downs expected from many companies that are set to release their earning report in the next couple of weeks. As little as a week ago, we were even naive enough to think that we may be able to break out and start another bull trend. Well, thank god that 90% of our watchlist is made up of commodity related plays. Other stuff is mostly composed to gauge the market sentiment and trade only when the mood is right, such as the banks, high beta techs lets us know we've been playing the right hand.
Today's big story definitely belongs to PBR in O&G. The potential discovery of world's biggest oil find in last 30 years has caught everyone's attention. Remember, we played a big find here with PBR before, well this one is potentially many times that size. This made traders chase both PBR and HES. Of course, nothing is proven yet and there's no details of any concrete data. Nothing is conclusive here so consider this a specualtive trade understanding the herd will go in either direction depending on the noise this story makes from now on. HES has been mentioned for a while here and PBR has been on and off for a long time. To see that most if not all the other oil plays finished well, we can only conclude that the oil excitement is far from over, even at this pricey level. ATLS an early play at DJIM made new highs , FB upgraded with a $81 tgt late last week so it's back here for a trade.
The coals were showing good strength and we added a new name we've been eyeing PCX (Patriot coal). PCX recently aquired one of the largest and lowest coal producers in C. Appalachia and its reserves on a combined basis will be around $2bln. Since this merger PCX is getting attention and is becoming discovered slowly. We're not saying this will become a profitable discovery like CMP has been here in the Ag-Chem sec before the herd, but with coal still running we need spread our wings. FB also raised its tgt to $86 from high 50's. Also, we'd look to MEE very soon as the chart looks to be setting up.
Another group which has an astonishing movement lately is the chem/agri. We absolutely "hate" it when the group gaps higher and strengthens up throughout the day. As we said before, buy dips or strength, you can do no wrong. Of course, it is extremely difficult to build up a large position on these sort of plays but as long as you are not being totally left out, it's all that matters.
We have a busy earning week this week with a number of "important" companies releasing reports. It'll be definitely entertaining to see how this market reacts to their guidance. A few pre-announcements even if not from any real heavy hitters were announced yesterday CRS-CROX-NVTL and should be in the back of many minds now in respect to the possible pain this EPS season from all sides..big and small. Even lower expectations should be spreading out to other parts of the market after these lemons. As far as trading wise, we are currently only sticking to the commodity market which is the most plays on our watchlist. Bottom line, no matter how much noise and fluff some reports may give us, we have to be totally aware of the fact what's the real bull market out there.