Three Little Bears Foresee a Stock Slide
What they're seeing, and why.
Yesterday, I offered Three Things the Bears Need to See. Lest you're allergic to click-through links, I'll again list them below:
1. Market darlings getting taken out back and shot—and we can check that box (Apple (NASDAQ:AAPL) is off 34% since September—although it is trying to fill the upside gap (from earnings) above $$463, which would “work” (through a pure technical lens) to $512; the other “count,” as detailed here, suggests a decline to $360).
2. The financials—up 18% in that same three-month span—have bent, but not broken. The bears need to see this complex take a hard right to the chin as they encapsulate the cumulative compression in our finance-based global economy. BKX 52 is the level to watch there; below that, and some beads will finally begin to build on the bovine brow.
3. A blow-off phase, as opposed to the steady grind higher, which has effectively worked off the overbought conditions as a function of time rather than price. I thought we might have seen this with a pop through S&P 1500 (perhaps to 1520 or higher), but it's been a tug-of-war, not a full-fledged retreat. Remember, most every market move is defined by three phases: denial, migration, and panic.
We also discussed three well-respected "traditional" bears—Dr. Marc Faber, Nassim Taleb, and Nouriel Roubini—who are currently bullish on risk-assets and asked whether their collective enthusiasm qualified as capitulation (my sense is that we need a broader buy-in like we've repeatedly seen, where investors get punished at the top and savers get screwed at the bottom).
I was thinking about all this on my commute into the city this morning, as I trolled my smartphone with one hand and sucked down a green monster with the other. It was then that I noticed a confluence of sorts; three folks whose "feel" I hold in high regard—Jeff Cooper, Michael Gayed, and Doug Kass—seemingly aligned in the bear camp—and all for different reasons.
The Talented Mr. Cooper is connecting the cycles of 1937, 1962, 1987, and 2013 (this is premium content, but you can read it here for free!).
Mr. Gayed is chewing through intermarket trends.
And Dougie Kass, on CNBC, said he is "getting the summer of 1987 feeling in the USequity market, which means we're heading for a sharp fall."
Now, opinions are like elbows—everyone has (at least) one—and there are two sides to every market ride. Truth be told, my inclination is that this rally phase is long in the tooth—a thought seemingly supported by one of the best in the business, Jeff Saut of Raymond James, who notes that the "buying stampede," which typically lasts 17-25 sessions, is now on day 26. That doesn't mean the end of the world, of course, but it does suggest a pause in the bovine cause, at the very least.
On the other side of that view, of course, is the NDX (INDEXNASDAQ:NDX), which looks like a textbook "basing" above support (it also looks a lot like a bullish cup-and-handle formation). I've included that chart below, as our jobs is to assimilate this multilinear dynamic into a cohesive and disciplined investment strategy.
Click to enlarge
I spied Deutsche Bank (NYSE:DB)—our European bank proxy—trading lower out of the gate, so I took a small downside flier on a different bank (in real-time on the Buzz; click here for a free trial). As I’m trading surgically, I've set my stop on the other side of the opening print to create a nice and tight risk profile.
While I pared my cannabis holdings a few days ago, some of the stocks I’ve been trading have taken a hard hit…and I’m looking to reload for a trade as a function of time and price. Any efforts will be right-sized, for while this remains my single-best investment thesis for the next decade, I’m less certain that my chosen vehicles will be the right proxies.
I'm on a pretty strict green juice cleanse: A bottle for breakfast, a bottle for lunch, and protein for dinner. That, coupled with early morning workouts and yoga, is my prescribed path toward shedding 25 lbs. The Oreos dipped in chocolate frosting at 3:00 a.m.? Not so much, but it's the little things in life that matter most.
If you're digging the Buzz and would like to flip the switch for your office, we'll hook you up big time. Just let us know and consider it done!
I will reload in BlackBerry (NASDAQ:BBRY) anywhere close to $12 as that's the 50% Fibonacci retracement of the upside move from $6 to $18.
I'm making a personal pledge to leave work at the office. Tuesday night, after a particularly grueling day, I got back to the 'burbs, went through the motions with my little one (my mind was racing), and joined Jamie and the twins for dinner. About an hour later, I heard one of my bonus twins ask their mom, "Why is Toddy in such a bad mood today?" I wasn't, I was just "in my head"; it happens, but I was quickly reminded that for nine-year-olds, such distinctions do not yet exist.
- Good luck today and remember that profitability begins within.
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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