Donnie,
Hi. Here's a similar albeit sad story, reguarding yesterday's market
First and foremost, has anyone ever seen both Abby Cohen and Dr. Evil in the
same room together?... I thought not.
At the close yesterday, Lewis Borsellino's Teachtrade posted that Goldman
Sachs and Merrill Lynch were big S&P futures buyers at the close. I
scratched my head and wondered why they would be buying when the Dow and S&
P indexes put in such terrible trading sessions and had formed very bearish
candlestick formations on their charts. This morning's events answered my
question.
In a blatantly obvious and manipulative move by Goldman Sachs to produce a
positive market environment for the two IPOs it is bringing to market this
week, Ms. Abby Cohen (The Ghost of Bubblemania Past), GS's chief market
analyst and cheerleader extraordinaire was paraded shamelessly on CNBC once
again this morning. Ms. Cohen felt compelled to help us realize that unless
we increased our exposure to equities, we were going to miss the boat. I
hope all of you read my column from yesterday to recognize what is taking
place here.
I actually recorded what Cohen said during her television interview and
played it back backwards hours later. Although the words were quite
muffled, I clearly made out the following message: "We shorted PALM, ENGA
and CLIC in your fat faces as your greed drove them up! HAHAHAHA"
It seemed like Goldman and pals had to pull out the big guns premarket this
morning because yesterday's close made this market look like McGyver and a
case of duct tape couldn't hold it together.
I found an interesting post on a message board thread by a Mark L. that
summarized Ms. Cohen's track record for the past year:
- On April 6th, she recommended her SUPER SEVEN stocks for the long-term:
CSCO, DELL, EMC, FDC, ORCL, PMCS, TER. As of yesterday's close, that
portfolio is down 46.2%. Long-term is right, because that portfolio needs
to go up almost 100% to get back to where she recommended them.
- October 3rd, she recommended BEAS, CSCO, EMC, JNPR, NTAP and ORCL. That
portfolio is down 60.2%. Oye vey.
- November 27th, she recommended CSCO (she hadn't had enough), DOX, EMC
(she still hadn't had enough), GLW, ITWO, SLR, SUNW, and VRTS. As of
yesterday's close, that portfolio is down 39.63%.
Now, Ms. Cohen is trying to convince us to buy once again as she is
increasing her exposure to equities from 65% to 70%. Hmm... how does the
old saying go?... "Fool me once shame on you, fool me twice shame on me,"
I believe.
Very interesting record indeed, wouldn't you agree? Amazing that she still
gets television air time with such a dismal record. Fascinating still, is
the fact that Goldman Sachs and Merrill Lynch could so blatantly front-run
Abby's premarket call this morning which caused an enormous gap up in all
indexes. When a layperson tries to front-run, they end up in handcuffs and
the judicial system makes 'an example' out of them. However, it is
perfectly fine for the brokerage houses to do the exact same thing
whenever they have the opportunity to. Isn't it fascinating that the
federal government wants to control virtually every aspect of how we act,
work, love, and spend our time in private, yet the Wayne Angells and Abby
Cohens of the world can commit these acts of fraud without lifting a
regulative eyebrow?
In fact, various brokerage houses came out today with lists of stocks we
should "BUY NOW." They are telling us we should be buying equities right
now because the economic environment will only get better with the Federal
Reserve in a rate easing mode and a potential tax cut later this year.
Let's just say I feel a little differently.
Let there be no doubt here, the Titanic is going down but the band is
playing as loud as it possibly can.
All week long we have heard portfolio managers and stock gurus tell us how
"value is back in vogue" and how you had to buy "old economy" stocks here.
However, they failed to specify which sectors they considered to be
values. Let's see, can't be the healthcare sector because that is trading
at historically high multiples... can't be the retail patch because those
are trading at ridiculously high multiples as well. In fact, you cannot
find such a sector because such a sector doesn't exist. As I stated
yesterday, the Dow index and the various momentum sectors which have been
created within the Dow are now experiencing the same parabolic stock moves
and stretched valuations we witnessed in the technology sector when the
Nasdaq made its blow-off move to 5100. This time, however, noone is
warning us of the danger that potentially lies ahead. Rather, we are being
told that the consumer will continue to spend and drive this economy out
of this listless period. Is that so?
What probably excaped the headlines late in the day as pure euphoria
spread throughout the NYSE was the fact that January consumer credit
surged $16.1 billion. A $5.3 billion rise was expected. If you don't think
this is one of the most serious problems in our economy today, please
think again. This figure not only shows an absurd level of complacency
throughout society but is quite disturbing in the face of negative
personal savings figures and down equity markets. As the savings rate
continues to reach new record lows, the conspicuous consumer continues to
spend with or without cash. Further, the consumer credit year-on-year
growth rate has been continually increasing since May, 1998.
The consumer is tapped out. The analysts and brokerage houses who are
trying to sell the argument of the American consumer being a soldier who
will fight this economy back to the days of tremendous growth we
experienced in 1999 and early 2000 are missing one simple fact: The
American consumer cannot fight much longer because they are nearly out of
bullets.
It is my opinion that the market is being manipulated here to drive the
popular indexes higher in an event to suck in as much sideline cash as
possible. There is no telling how long this will last but the only thing I
do know is you must fade this move. The current environment does not
support daytrading or scalping as moves both up and down are very abrupt
and generate little follow through. Rather, being a positional trader at
this juncture is the only way I see you can successfully participate in
the upcoming move. Accumulating positional short positions is not easy
work, nor is it easy on the psyche. The fact that you will undoubtedly
endure pain before pleasure is something you must understand and accept
before you initiate your first order. Unless you have the intestinal
fortitude and psychological strength to endure the silliness that is often
generated prior to a major leg down, I suggest you do not attempt this
strategy and take a seat on the sidelines. Today was one such day for me
as many of my short positions went disgustingly against me. Although I
felt like reaching for an airsickness bag all day, I continued scaling in
and building my positions in the bloated pigs of the Dow Jones Industrial
Average.
A wise man by the name of Tim Mobley once said "you don't sell them when
you have to, you sell them when you can." Tim, I'm there with you brotha',
and I'll see you when our ship comes in.
As far as public enemy #1 is concerned, Philip Morris will succumb soon.
It has two things working against it: Its internals are tremendously
diverging from its price action, and God probably wants to spare all of
you at TM 2001 the displeasure of eyeballing my butt cheeks. That being
said, it is always crucial to know your pain tolerance level so you have a
stop in mind prior to entering any trade whether it be long or short. When
stocks experience a "blow-off" run, they sometimes over-shoot all levels
of resistance. The next area that (MO) could possibly test is the 52-53
area before it should collapse under its own weight. If this next level of
resistance is too far for your comfort, use 1/4 pt. above today's high as
your "buy stop" point and re-enter the trade in the 52-53 area should it
get there.
Be careful out there, have a good night, and give my best to Denise.
Later,
Steve |
