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Have We Reached the Turning Point?

by: Trader Mark August 11, 2008 | about stocks: COH / HOG / MGM / RL / SPY / WYNN    
Trader Mark

Trader Mark

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Very positive action Monday after surpassing S&P 1290. With still 2 hours to go, I said any close over 1305 or so would make us happy campers from the long side. (I need to stress - we need to close above that level; not simply trade over it during the day.) I've continued to reduce exposure (un-hedge us) from the short side; now we just need to actually find stocks on the long side that go up, instead of down.


With this sort of action we can potentially see a move all the way back up to the 200 day moving average (1370 and falling) although not at the pace we've experienced the past few sessions. Or maybe we will; everything happens in lightning speed nowadays. When we get there I will revisit the dark side of the market, as this rally is yet another hoax in my opinion. Our troubles do not go away just because crude oil is lower.

Some amazing action out of the retailers - see Coach (COH) - and Polo Ralph Lauren (RL), which we considered last week, continuing  to fly. Lots of tried and true shorts over the past year such as Harley Davidson (HOG) are simply unstoppable right now as oil heading to $24 brings the US economy back ;) I'd be unsurprised to see restaurants also fly. Once again, this is simply the opposite trade of everything that has worked the past year to short - casinos should also ramp. It is quite a simplistic thinking but it is what it is - look at Wynn Resorts (WYNN) up 6%, MGM Mirage (MGM) up 8%.

It is truly amazing how the entire world has changed by a 40 cent drop in gasoline prices - headed to 65 cents. One has to ask why are we not taking serious steps to stop us from being hostage to oil prices when we can see how our entire economy, and system of capitalism, dies at $4 but revs at $3.50.

At some point in the future we'll wake up from this dream state, look across the bed to the stock laying next to us and think "what were we thinking?" - but for now the party is on. Laggards are leaders.

Note to self:  on June 20th your sarcastic self wrote

Can we only be half a week away from the first breathless talk by Maria or Erin about how serious Ben is about slaying the inflation beast? Laughable - but we'll play along. If/when crude every does take a break (say $120?) then we can also hear about how gas $3.75 instead of gas $4.15 is going to mean the consumer will be piling into the malls. Crude $100? Gas $3.25? Time to buy airlines! SUV makers! Hurry!

Note to self: Listen to yourself next time.

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This article has 18 comments:

  •  
    Aug 11 03:56 PM
    Oops I take that back. I didn't realize the headline was sarcastic.
    Reply
  •  
    Aug 11 04:17 PM
    Dead cat's bounce.SELL,SELL,SELL!...
    Reply
  •  
    Aug 11 04:20 PM
    The language still is not necessary, Spade.

    Funny how some writers on this website championed the notion that expensive oil would help HOG because people would buy them as money-saving, high-efficiency vehicles. Hah! Nuclear subs use zero gasoline, will consumers start buying those to get to work? Looks like HOG does not like expensive oil.

    This little run up will suffer the same fate as last one with the U.S. HOG market continuing its long, long deflation.
    Reply
  •  
    Aug 11 04:30 PM
    Yup, good stuff. Certainly there are significant issues besides the price of crude oil. For example, the whole credit market thing...

    But, specific to energy and oil, if there was no such thing as sub prime and all that, even if oil continues its fall the energy problem has not gone away. We still need to develop geo-political neutral solutions like solar, wind, geo-thermal, bio-fuels, etc.

    Indeed, I think there really are people out there thinking that lower oil will resolve everything...
    Reply
  •  
    Aug 11 04:34 PM
    I think this is a sucker rally, Mark. I don't think you believe in it either. With all the problems in our economy and a world-wide economic slowdown just getting started, what corner could we have turned already? It is so tempting to jump on board when the market starts moving, but I just can't believe this is THE turn in the market. I may be left in the dust, but I just don't see it. Consumers have no cash and declining credit availability; I don't think the stock market reflects that yet. What a market!
    Reply
  •  
    Aug 11 04:50 PM
    The decline in gas gives the consumers cash. Besides, commodities aren't going to go up either unless the US consumer comes back. So your either short all stocks or just short commodity stocks, but you definitely can't be long commodities anymore. Its finally clear that high commodity prices cured high prices. As it always does.
    Reply
  •  
    Aug 11 06:48 PM
    "Bull markets are born on pessimism, grow on scepticism, mature on optimism, and die on euphoria" ~ Sir John Templeton
    Reply
  •  
    Aug 11 08:33 PM
    Buy the company, not the market. If earnings are going higher its a sure bet the share price will too.
    Also people need to stop equating the stock market with the current economy, the stock market is always looking 6 months ahead.
    Thats why China is booming but stock market is tanking, US in recession but market is going up!
    Reply
  •  
    Aug 11 08:50 PM
    I am a big believer in 'collectives' Ozcutty, but the investment community at large was wrong Q4 of 2007, wrong all this time until now and is wrong about what is going to occur six months from now. I want it all to be GREAT! But I believe that our current economy has rapidly begun shifting from Efficient Market Hyposis (more like Fuedalism) back to Save and Invest. The gods and clods economy doesn't work unless you throw the little guy the bone. And in our case, the little guy got preyed on this last decade. Main St. fuels Wall St. Not saying the bright guys won't make some money, just saying it's my opinion the herd mentality know longer works as a faithful indicator it once was.
    Reply
  •  
    Aug 11 10:55 PM
    This is just about the time when the bags are handed to the holders. Future price of oil is not all guaranteed or known to base the future of an economy on.
    Reply
  •  
    Aug 11 11:52 PM
    May be markets are celebrating the end of Bush regime.
    Reply
  •  
    Aug 12 01:03 AM
    We are seeing a light volume move up while the professionals on the floor sit on the beach. We will likely see a correction of great magnitude once the big boys return.
    Reply
  •  
    Aug 12 08:34 AM
    the bulls complain about "all the pessimism," yet are themselves constantly crying "buy buy buy," "turning point up," and "turn around point!" -

    what would this unfaltering optimism mean to them on the other side of the trade?

    i guess it's all part of the game :-)
    Reply
  •  
    Aug 12 11:16 AM
    The American economy is propelled forward by advertising. Advertising puts a positive spin on everything.

    Businesses have to sell goods in order to pay the salaries of their employees and therefore have to convince us fat Americans that "pizza is good for our health."

    America needs to go on a diet.

    Tell that to advertisers and spin doctors.
    Reply
  •  
    Aug 12 12:09 PM
    Like I said many times before, the gaming stocks such as Wynn, MGM,LVS, and Byd needed any reason to take off as they are too strong and too good of companies to sell at these lowly levels and I'll sign my name.
    Daniel Kowkabany
    Reply
  •  
    Aug 12 04:16 PM
    <<<Buy the company, not the market. If earnings are going higher its a sure bet the share price will too.

    I have about 25 stocks this quarter who have blown up on me, that would argue to the opposite
    Reply
  •  
    Aug 12 04:17 PM
    <<Also people need to stop equating the stock market with the current economy, the stock market is always looking 6 months ahead.

    What was the stock market looking forward to in October 2007 at all time highs?
    Reply
  •  
    Aug 12 06:18 PM
    Stock markets have been in a secular bear trend since 2001. Once sector after another is breaking down but nothing comes down in a straight line. Therefore, we now and then see a correction. All of this has been happening while interest rates were also coming down...Does anybody know what is going to happen when they decide go up again?
    Reply
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