Portfolio Asset Management CIO Lee Munson argues there is too much uncertainty in BP’s future and investors should look elsewhere.
No, this is not a reference to HBO’s True Blood, a favorite of mine (I can’t believe we have to wait until June for season 2). I am talking about the V formation of most chart patterns including the S+P 500 over the past six weeks. The issue is that V’s are not generally found in nature. Usually, we get a W or something that will either fill in a gap or at least try to retest the bottom of the V. Seven weeks ago I went on CNBC and said to raise some cash because we could see the DJIA get to 6000. Boy was I wrong! I no longer think that will happen, but DJIA 6300-7000 would take very little in this environment. Today we see CAT hit their first loss in 17 years and some M+A activity is heating up. This is good, not bad. Just keep in mind this just means we are starting to get to the bottom of the economy when solid firms go into the red and mergers of equals start popping up. It does not mean it is over, though.
In the end, I would still rather wait to see some consolidation and keep trading short term until we either retrace more than 3-6% or can go sideways for a while. Even if you don’t like the money the government is spending doesn’t mean it won’t work. The problem is that it will debase the currency. So, check out the potential double bottom on the gold charts, remember that people will still need office space in Manhattan, and keep some cash around for a mild to wild pullback. Just don’t be afraid to dip your toe in when it seems the world starts looking like ‘the end’. You generally only get 2-3 times to jump in and after that you are a broken record or a clock that is only right twice a day.
Good question. While I feel we are heading for a correction, my best guess a few weeks ago that it would occur by mid April is not happening. Today we are seeing a typical blow off the Monday after options expiration. I am using this opportunity to play Treasuries on the short side and pick up some gold stocks. Nothing ground breaking, and I am keeping my limits tight. Meaning, we are still just hanging out until we see some real changes in volume. The Euro started to break down, but Helene Meisler has reminded her readers that this is a leading indicator and it could take a few weeks before the weakness works its way into the stock market. So, now we are looking at the beginning of May before the fun starts. What you want to avoid today is buying ‘long-term’ positions just because the market is down a few points. It could easily reverse and start to rally over the next few days. So, unless you like the feel of a meat grinder, keep the swings ultra short or go out and enjoy the sunlight.
