COMMENTARY ----- Is the Small Investor Helpless?
No and Yes.
MANIPULATING SENTIMENT - A BIG ADVANTAGE
Unless you are very savvy, experienced, and lucky forget it...go to cash or some other safer investment, because logic is not working. Let's have a look.
The days leading up to May 8th looked far more promising than the stock market numbers showed. Virtually all the economic signals were looking better, even Alan G. was optimistic (well, for him). Even the USD was still looking good. But the Markets slowly drifted down and ignored it all. The semi Book to Bill ratio was well above 1.0 again and would continue to reach 1.26 in a report issued last week. Truly remarkable performance, but again, the SOX sank to 8 months lows just today, literally making a mockery of its solid performance.
But, wait, all of a sudden on May 8th, there was a tremendous one-day gain. For those who were able to see or even control Market sentiment, they made out like bandits. They not only benefitted from a multi-month short since late January, but they bought QQQ's and CSCO and QLGC calls like crazy during May 7th and early on the 8th. They had the ability to ramp up the market like a jet taking off, on even a mediocre CSCO report, since everyone knew the Market was technically oversold. They just needed to get the ball rolling. The result? They made 200-1200% gains in 24 hours on higly leveraged call options.
IF YOU CAN'T TRUST FUNDAMENTALS, THEN WHAT?
From an individual stock standpoint, many fundamentally sound stocks are tanked for no apparent reason other then untrue rumors. Being able to read the "fear" and then simply starting a juicy rumor is all it takes. They just start the selling and then the less informed slowly see the stock tanking or maybe a CNBC or Briefing.com mention, and the rout is on. The damage is done for the "longs".
Stocks with good fundamental performance and high growth even during the last two years are being targeted, too.
Stocks like King Pharmaceuticals (KG) down from $46 to $18.70 intraday today. KG was named the #1 Profitable Company by "Smart Money" magazine recently and shorters have started untrue rumors about their two leading drug three times this year. It doesn't matter that the company has is already trading at a sizable discount to its peers or that it has rarely missed earnings consensus.
How about AGM (Farmer Mac) that was $46 in May only to hit $22+ intraday a few weeks later? Apparently shorters used rumor and an inaccurate "NY POST" story with 19 inaccuracies about this very stable, high growth company.
There are others too like ITRI (Was $36, now $21) even though they reaffirmed guidance Friday and have a reasonable PE. TTIL is another that has been tanked recently for no apparent reason. And how can we forget ESST, that is being jerked around like a yo-yo.
In simple fact, fundamentals may help limit a stocks fall more readily, but ask the shareholders of the above companies. It sure didn't feel that way. The problem is that when good performing stocks (ESST is a prime example), can't succeed, then what stock can? ESST has been blasing earnings consensus, is in a very healthy sector and has a PE and PEG way below the norm. So the big question that burns in fundamentalist minds is, "How can I trust my research if fundamentals can be destroyed by one wild rumor?
THE RALLY TODAY - MYSTERY #7,089
We were supposed to have 3-5 more days of gloom, maybe even until July 4th. The Market started out weak and kept going. Gold was up, the dollar was down, things again looked bleak. Then all of sudden the Markets turned around. And here's the biggest, most bizarre thing of all ---- NO ONE KNEW WHY.
Huh?
Yes, that's the capper. The Markets and Indexes go way down in spite of good news, but then the Markets go up without any reason. Now this isn't anything new in the history of the Markets, but it's more wicked and sharp than I certainly remember. That lends even more credence to the theory that some major players can set something in motion, behind the scenes, that can have major impacts on the markets and confuse nearly everyone. I don't know of anyone that can tell what will happen from one moment to the next.
Every feel like trading is like bald tires on ice? Welcome to the extremely tricky and treacherous world of 2002 investing. Did I say investing? Sorry I meant "Scalping". |
