James Cramer has some very interesting comments on the cyclical move -
thestreet.com --- free trial link
thestreet.com
<<Now here is the clincher. Guys who sell calls love to hedge them by buying out-of-the-money higher calls. But this move took place so fast that options makers didn't even bother to add out-of-the-money April calls to many stocks because expiration was right around the corner. So the people who shorted April cyclical calls had no way to stop out their losses other than to buy common stock. >>
thestreet.com
<< What do the cyclical stocks that are moving have in common? For the most part, they have acted poorly since the twin catastrophes of East Asia and Brazil. (Losers.)
What do the stocks that are selling off have in common? For the most part, they have acted well since those global problems. (Winners.)
The winners, I believe, began to have too high a multiple on future earnings to be justified by this level of interest rates. The losers began to have too low a multiple on future earnings based on the increased level of certainty for future earnings, given that Japan and Brazil have started to turn and East Asia is getting better.
So we are seeing what is known as multiple compression for the winners and multiple expansion for the losers. >>
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James Cramer:
<<But has it ever felt good when it was right to buy things?
The worst it ever felt in the past five years was Oct. 8. >>
...Short-term Tradingwise; perhaps the opposite is equally as true; perhaps the best time to sell is exactly when those gains feel the best ?
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The cyclical shift was long overdue - we will shortly see to what extent the market is willing to support the shift. Make no mistake, the future is very bright indeed. The near term, tradingwise - is a small (but, very profitable) part of the overall story.
Bull - the rumblings are indeed being felt from all over the world...I've never questioned the reality, or the inevitability of the shift, just the Streets reaction to it - which remains to be answered... hopefully, regardless of the road taken, we'll all end up at the same destination - about OSX 140 again sometime in the next year, or so !
$17.46 Oil - who would have believed that number mere months ago ...I'd be curious as to if Rainwater was still in Crude Futures going into this rebound ? - if so, the profits were enormous ! |
