| A Turnaround is Pending |
|
| July 15, 2008 |
|
July 15, 2008
A Turnaround is Pending
It's time to hand over the reins, all you nervous Nellies! We're not interested in your risk-averse squeamishness!
If you're waiting for the big sell-off, look no further. We're right in the middle of it, folks! Capitulation, panic selling—call it what you will. The market's been taken hostage by the financials, brokerages, mortgage companies and homebuilders. Investors tired of watching stocks tank are liquidating their bottom-of-the-barrel positions and stashing the cash under their mattresses. While it seems like a good idea, you'll never make any money just letting your money collect dust!
There's no way to really explain why people trade the way they do, but the bottom line is this: Investors tend to get bullish after they buy and bearish after they sell. And as of late, we've seen a lot of selling, which means there's a lot of bearish sentiment out there.
But we're close to a turnaround! The brutal, heinous nature of this market is sector-specific. The banking sector took an 8.5% blow to the chin yesterday—a waterfall drop with no bullish divergence whatsoever. But you have to accept that not all banks are going belly-up. We're caught up in one awful sector, and that's catalyzed the sell-off in recent days. But the QQQQs, small- and mid-caps remain largely in tact. They're not striking new lows. It's the large-caps—the big companies—that are getting slammed.
Did you know that General Motors (GM) has a market cap that's less than our very own FLIR Systems (FLIR)? GM generates $180 billion in revenue and now has a market cap of $5 billion, while FLIR has a market cap greater than $5 billion and revenue of only $1 billion!
Like I said last week, large-caps are typically an investor's safe haven when the small- and mid-caps implode. But given that the current situation is reversed, we're not dealing with your everyday variety bear market.
But don't worry—I know we're getting close to a capitulation bottom. I can see it in the patterns.
I can only tell you what I've told my Trending123 subscribers: The best thing to do is to block out the noise—Fed Chairman Bernanke's testimony before Congress; President Bush's bid for a Fannie and Freddie bailout—and wait for the set ups to come.
Stay Alert.
There might be some intraday hit and runs as we travel along the bottom, but I promise the set-ups will come. Even if the large-caps continue to plummet, there are always tradeable hot spots. That's how we've maneuvered our way so far through this tricky market.
Remember: While the financials are dealt one blow after another, constantly falling to new lows, biotech stocks are at new 2008 highs! The Biotech Holders (BBH) fund is trading up around the $180 mark and it's returned 10% year to date versus the -14% for the S&P 500. That's just a hair below its 52-week high!
How can this be? I've told you before: We're seeing a sector rotation out of commodities and into tech. The volume is shifting out of agriculture, fertilizers and oil and into the weaker sectors. Think of companies like fertilizer-giant Potash (POT) as mini-monopolies. Right now they're enjoying the benefits associated with pricing power. But wait until more of their low-level competitors move up the ranks. POT's 10-minutes of fame are fading quickly!
So you see? By some measures, certain sectors and indexes are holding up great! Don't sell-off your positions and stash your cash under the mattress. There are profitable investment alternatives even in this topsy-turvy market. Follow my lead: We'll emerge from the market madness with our portfolios intact!
Sincerely,
John Lansing
Trending123
| 
