I am hoping that the market rally will come to an abrupt end after the Alcoa results. As I posted on the HMS board, their report was less than impressive. In summary, they continue to see weakness in key markets:
DECLINES in Aerospace
DECLINES in Commercial Building
DECLINES in Industrials (negative 25%-30%)
FLAT in Cans and Packaging
Increases only in Automotive (2%-7%) and Trucking (5%-10%)
They did benefit from a 9% increase in the price of AL - but their production numbers are basically flat. They emphasize their liquidity - meaning "we have cash to survive" - and the fact that they continue to terminate positions - 70% of which they claim are permanent redeuctions. They have trouble in Italy to the tune of $320 million and have yet to settle their energy source and cost issues. This, along with a weak dollar remain negative factors for them going forward.
Bottom line, sales are not going to get back to historic levels anytime soon. Further, they are very dependent on China for growth - and that bubble is likely to pop...
Let us see what happens.
In the mean time, I did lighten up a portion of my QQQQ short position - equal to the number of $45 March put contracts that I purchased last week. Essentially, I swapped the short equities (at a loss) for the options. I see the Qs correcting along with the general markets, however I am more bullish on this (technology) segment than any other. If the markets do continue to rally, the QQQQs will lead the way. I am now waiting for opportunities to swap out similiar portions of my SPY and DIA shorts.
For those who are concerned that I am exiting prematurely, do not fret. I remain bearish - and my put strategy will keep me in the game. I am simply protecting myself from an extended rally in the SPX and DJI. I am doing this in light of the recent technical developments (as discussed in prior posts) and the "general market conditions" - extreme liquidity and a sagging dollar. Once the technicals diverge again and the general conditions show signs of change, I'll be the first to sell equities again. In fact, I am identifying a portfolio of shorts that I am now tracking, they include:
ANF
JCG
MCO
Let me know if you have any shorts in mind!
Cheers.
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8 comments:
Hi David , I read the same AA report that you did . ( CNBC got the good report)
I found reason enuff to set pat today.
Among them ,
Oil came off its high by 1$
after maybe a 5 wave up
The $ may have bounced off the 38% fib. maybe finishing corrective wave 2
Gold bounced off the 50% fib after what I think was a wave 5 . and 9$ from its High
I realize if I am wrong on One of these , I am likely wrong on all 3.
The Dji , Comp and spx all it targets or close enough.
Not sure how it fits but I see more down side on the long bond.
Rates higher then 5% buy end of the currant leg up ( with a corrective wave 4 in the middle )
I am mentally ready to bail and flee to the other side if need be.
We have gaps to close , gaps to close , lets start closing gaps .
Cheers
Well... I'd love to see a nice little selloff. I don't think we're going to crash, though.
Hey Payline,
Covering shorts is one thing - but going long is another. It is hard to be a stock picker here. If I had to pick, it would be in a sector that will "melt-up" in the final phase of this thing. My guess is that technology and financials will take that role. I won't touch financials with a 100' pole so that leaves tech. I took a small piece of SWKS - which teddy seems to be a fan of. I had my eye on this company earlier and was hoping to get in closer to 14.40ish - but I decided to take the "plunge" today instead. I also like QCOM from a technical standpoint. A break above 50 would trigger a buy from me.
I honestly have trouble finding other buy opportunities out there - and I would rather be in cash - waiting for the correction to begin!
Hey Kerry,
I agree, a selloff/correction is in order but I do not see a crash without a major event - country default, series of missed earnings, major bank failure, major accounting fraud, geo-political turmoil, etc.
I simply will not trade the hail mary play...
Good luck out there!
David , I would agree , I would have no clue how to pick anything, Lets hope I dont need to, My only thoughts would be Spy. ( all I can say is you catch all the rotation )
Good Luck out there .
One more comment , there are all bulls out there , but a move down would sure pop some stops , like a rev short squeeze.
Hey something that does not have an up arrow would be nice at this point ,
Some picks might be in smaller companies, beaten down in March 09, but who have risen extremely till now.
Any broader meaningfull correction could send these down exponently to older levels.
CAAS, ALL
Hi Paulus,
Looks like CAAS has had quite a run in the last few months. Lot of buying on heavy volume. When it falls, it will fall hard (China bubble to burst) - but it is too hot for my risk appetite.
ALL seems to be a less risky candidate simply because the volume has been more steady and has favored the sell side when it breaks average. It is up near it's 52 week high. I would consider selling a break below 29 - at the same time, I would be a buyer at a break of 33...
Cheers!
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