Pullbacks preferable!

In order for markets to continue higher, pullbacks are preferable. They work off overbought conditions. They wipe the smiles off bulls faces. They build better bases. Looks like we may be getting one here. Anything is possible but we expect any pullback to be controlled and rotational at this juncture. The one area that pulled in most was the SEMIS as the group was juiced on a big buyout. The groups still looks fine.

For a change, really didn’t see any changes that stuck out today so nothing to report.  With the fake employment number coming up Friday, we do expect some jello moving on the plate.

NASDAQ 5000-YIPPEE!

                                              NASDAQ 5000-YIPPEE!
By Gary Kaltbaum
March 2,2015
Ahhh…the last time the NASDAQ hit 5,000. We remember it like it was yesterday. After all, it is not often where stocks break out of bases and go up 5-fold in 3-4 months. After all, it is not often a major index goes climactic with many stocks doubling in days. Thus a few thoughts on the similarities and the differences between today and 99-00. Ok…we are hard pressed to find any similarities but we sure can find differences…some good and one not so good.
On the good side, valuations are not even close. This is good news but keep in mind, it took 15 years to get here. It took many names without earnings to go to zero. It took many big caps like the Microsofts and Intels to go from 100x earnings down to single digits. For sure, there are still plenty of names with obscene valuations but they are fewer and far between. The one area that is out there is BIOTECH. Many names have no sales but still have market caps of $250 million up to $5 billion. That is a disaster waiting to happen.
The NASDAQ is only 4% from its recent breakout. Back then, the NASDAQ broke out on October 29,1999 at 2924 and made an almost straight shot until the top on March 10, 2000. In other words, the market had a huge move into 5000 back then.
Where’s the insane reactions? Those that remember know how noisy and crazy it was back in 99. We remember people coming into our office telling us if we can’t guarantee 30%/year, they would not hire us. We remember being fired by a lady whose money we doubled in 6 months. We remember one elderly doctor F-bomb us because we sold his Oracle after we made him 4-fold on his money.
We are not seeing any outrageous predictions! Back then, books were being written about Dow 36,000. How about the Dow 100,000? Ain’t happening yet. In fact, we continue to mostly hear about the end of the world talk.
We are not full of ourselves yet. Back then, we thought we were geniuses. We still remember many in our industry saying Warren Buffett sucks and he was not being flexible enough with his investing. Of course, our favorite Warren Buffett line is ” Only when the tide goes out do you discover who is swimming naked!” There were quite a few naked swimmers come 2000-2003.
On the not so good side…and it is a biggie! Everything you are seeing in the market and in the economy is off of $14 trillion of printed money, 0% interest rates, and in some cases negative rates…and the promise to continue this barrage of unprecedented easy money that has caused every bubble throughout history which has led to every crash throughout history. There is very little doubt in our minds that at the end of this road lies the same. But this time, these ex-tenured professors that have their fingers on the buttons that conjure  up trillions of dollars out of thin air…have taken easy money to lengths no one could fathom in the past…thus potentially elongating market moves. Until markets decide against these moves, it is tough to fight it.
Our tactics are simple. Try to play whatever is in front of us as much as it is worth. We do not predict…we interpret but it is in our file manager for the potential and hope for some sort of climactic action.(Lots of cake to make!) We highly doubt we will ever see again what occurred back in 99-00 but with $14 trillion sloshing around and 0% rates around the globe, one never knows. Keep in mind, regardless of the indices, this remains a 60-40 market where 40% of the market just ain’t happening.

60-40 Market feeling a little tired!

 

After a darn good move, this 60-40 market is now feeling a little tired. A 60-40 market simply means about 6 out of 10 stocks remain in shape while 4 out of 10 just ain’t happening. Looking farther out, these numbers do not thrill but as long as the major indices stay above their respective 50 day average and as long as the 60% keeps working, no sweat.

So to be repetitive, we remain bearish on a long list of areas…some we have been bearish for quite a long time:

ENERGY/OIL & GAS…except for REFINERS.

STEEL, COPPER, ALUMINUM, COAL and all that stuff.

GAMING

METALS/MINING

UTILITIES, REITS as BONDS have topped. Near term , bonds may have put in a low.

RAILS

MACHINERY

We are also starting to see tops in AIRLINES which with the RAILS have held back the TRANSPORTS recently.

Our favorites:

Remains a long list of MEDICAL,MEDICAL PRODUCTS, BIOTECH, MANAGED CARE and GENERICS.

RETAIL-(DISCOUNT,HOME IMPROVEMENT, DEPARTMENT STORES, DRUG STORES, SUPERMARKETS , APPAREL)

SEMICONDUCTORS

RESTAURANTS

A few other notes:

FINANCIALS are mostly mixed. Not much there.

GOLD had been emerging but is now still in pullback mode.

HOUSING is the latest group that has emerged on the upside. This group had been dormant for a while.