Bullish Force, Questionable Catalysts - Tactical Trading
07 9월 2011 - 9:00AM
Zacks
Whenever the market makes a powerful move against the prevailing
trend, it's good to look at the catalysts, the force of the move,
and the likely participants.
After the US Labor Day holiday, Tuesday trading saw
an initial fear reaction as sober weekend news from Europe was
absorbed.
But an interesting thing happened on the way to
another 2% meltdown. The market, as measured by the S&P 500,
came close to the last swing low on the morning of Ben Bernanke's
Jackson Hole speech -- and then it reversed.
Below is the chart showing that reversal where the
S&P traded down to 1,140 (just above the Friday August 26 lows
around 1,137) and then rebounded higher to close at 1,165.
I've been saying for a month now that 1,100 on the
S&P was a potential "extreme value area" because of the amount
of time the market spent gravitating around this round number
between October 2009 and September 2010. To say nothing of record
earnings near a conservative $90 per share estimate (for the index
constituents in aggregate) creating a P/E multiple of 12.
And I pointed this out before the test and apparent
"double bottom" at S&P 1,120.
So I made this chart Tuesday night in preparation
to shoot my regular Wednesday video presentation. My theme was
going to be taking advantage of the "low-risk buying opportunity"
the market was handing you with the confirmed test of the last
swing low and the resulting strong reaction the other way.
I wanted to emphasize how you had to think a little
counter-intuitively (i.e., contrarian) to take advantage of fear
and apparent bearish momentum. If you saw my video last week, you
heard me say that the market tends to "fool the most people" and
that it appeared to be sucking in people to the long side just as
the relief rally was ending.
After Tuesday, I started to think that the market
could be setting up for a run-away move to the upside when nobody
was looking.
What often happens at these points of uncertainty
and tug-of-war is that a violent resolution is reached. In this
case, the market could run away and everyone would miss it. Well,
not everyone. Not the brave and contrarian.
My argument that this was "low risk" was based on
two factors:
1) You had confirmed institutional buying interest
at 1,140 (above prior swing low) that vaulted the market back up to
1,165
2) You had a very close stop-loss point (1,135 to
1,140) to use if the market should decide it was wrong about being
so bullish
Force, Catalysts, Participants
How do we gauge the force of this reversal? By what
happens the next session, of course. And by the time you are
reading this you no doubt have seen the strong push higher in
Wednesday trade that took the S&P above 1,195 (nearly a 3%
gain).
What are the catalysts that have institutional
players buying the market (and blowing out the shorts)? Surely they
can't have priced-in the worst of possible fallout from Europe. But
maybe there are financial rescue plans in the works that could
prevent collapse there, or at least buy more time.
What are other risk assets saying? I've been
watching crude oil and copper for weeks as canaries in the mines of
risk appetite and they are not dropping dead in fear of
recession.
And obviously, market participants are thus far
pleased with the leaked details of Obama's jobs plan, which could
total $300 to $400 billion in infrastructure stimulus. To what
degree politics-as-usual hinders his plans seems to be discounted
for now.
What's true and what's an illusion? I don't know
what will prevail in the economy or Congress. But I do know what
the message of the market is saying. And as you can see below, it
is saying "Bulls Rule!" For now.
Accordingly, I have kept many of my bullish
positions in energy, industrial, and materials stocks such as
National Oilwell Varco (NOV), CVR Energy (CVI),
Cummins (CMI), and Southern Copper (SCCO).
Kevin Cook is a Senior Stock Strategist with
Zacks.com
CUMMINS INC (CMI): Free Stock Analysis Report
CVR ENERGY INC (CVI): Free Stock Analysis Report
NATL OILWELL VR (NOV): Free Stock Analysis Report
SOUTHERN COPPER (SCCO): Free Stock Analysis Report
Zacks Investment Research
CVR Energy (NYSE:CVI)
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부터 6월(6) 2024 으로 7월(7) 2024
CVR Energy (NYSE:CVI)
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부터 7월(7) 2023 으로 7월(7) 2024