Chris,
The price action on GE was pretty bizarre today. It was much stronger than the market all day, took a hit with all the rest in the last hour and still managed a 1/16 gain. Support around 89 1/2 seems solid, but I strongly believe in GE's true bell weather status as the best blue chip proxy for the market.
If the market tanks, which we both suspect will happen in the very near future, it's only a matter of time before GE's support is broken. When it goes, it will go hard.
Looking at it from either a TA or FA view, this is an overvalued stock kept afloat by liquidity, both foreign and domestic, as a result of brand name flight to quality.
If the dress contains some of WJ's potential progeny, all that foreign currency will be asset allocated right out of American blue chips and into the American dollar via the long bond or currency futures. The dollar will remain king, at least until the EU establishes itself, but that fact doesn't necessarily bode well for our beloved KO, IBM, and GE. Massive inflows of cash can be invested in a variety of ways. When the 401K rank and file begin to question their "buy the dip" strategy as well, fund inflows will be quickly reallocated and the liquidity will effectively evaporate.
That's why I am long GE puts.
Franco |
