Mr. Sensitive

September 16, 2011

FSX Friday Update

Filed under: Uncategorized — lbej @ 16:56

Ignore this rally.  The S&P 500 rose more than 5% this week and the more speculative Nasdaq Composite added 6.3%, but long-term investors should discount the bullish action because it is driven primarily by money managers returning from vacation and crowding into already crowded trades in advance of the end of the quarter two weeks from now.  Wait a minute, you say: you told us to disregard the market during the summer months because the money-runners were at the beach, and now you’re telling us to disregard the market because they’re not at the beach?  Yes, yes I am.  Let’s get through the quarter and see what earnings look like starting in October, then we’ll see some decisions get made.  I was watching Laszlo Birinyi, a prominent technician, on CNBC earlier in the week, and his take was bullish (a bull on CNBC—shocking!).  He talked about the same tired fundamental themes that everyone talks about—European banks, Fed policy, the do-nothing U.S. Congress—but the meat of his take is the technical behavior of the market.  Technicians rely primarily on charting price and volume trends to identify up- and down-side breakouts.  If they cared about why, the whole process could become a chicken-and-the-egg situation in hurry.  People are prompted, technicians say, to start buying a stock when it reaches a support level.  Okay, so how do you know where the support level is?  The support level is the level where people start buying the stock.  I think it’s because of the circular reasoning built into technical analysis that technicians dispense with fundamental reasoning all together.  If they can’t graph it, they don’t care about it.  The chart says $10 is a support level, unless of course $10 doesn’t hold, in which case it’s not a support level.  So Birinyi was asked why he thought the bull market (yes, we are still in one) would be resilient through the balance of 2011, and he let slip that he was confident because market leaders Google and Apple are behaving well.  At that point, my jaw literally hit the floor.  I was doing push-ups at the time, but it was very much apropos of my incredulity.  Of course the interviewer didn’t press him on it; if you say the word ‘Apple’ on CNBC, everyone just starts smiling and nodding in a creepy Pavlovian way that makes me want to take a hammer to my iPod before it’s too late.  What shocked me is that traders crowding into an ever-smaller coterie of headline stocks is the unmistakable sign of a tired and dangerously overextended bull market.  It happened with GM and RCA in 1929 and it happened again with JDS Uniphase and Cisco in 2000, and now Birinyi is pointing out the same dynamic in Apple and Google, only he is somehow spinning it as a bullish signal?  Also…has he looked at the charts at all?  The charts for Apple and Google don’t look remotely similar.  Apple and Amazon, sure.  Google and IBM, possibly.  Apple and Google, no.  Here’s Apple’s one-year:

And here’s Google’s:

So…no.  My opinion is that the market will remain range-bound for the next month at least, although the mounting violence of the gyrations within that range suggests to me that there’s a lot of nervous potential energy building up.  Europe may be the eventual catalyst for its release, but somehow I don’t think so.  There are too many eyes on that situation for any development short of a shooting war to really blindside the market.  I have a feeling it’s going to be China that does it.  There’s an awful lot of official complacency about the social and political stability of the People’s Republic, which is a curious attitude for Westerners to have about a tank-happy totalitarian state.  Oh, but their culture is different, we say.  Yeah, well, we said that about the Arab dictatorships until earlier this year, and how are those folks doing now?  I’m not saying the status quo can’t keep quoing for a while; I’m saying it can’t go on like this forever.

The Family Stock Index put on quite a show this week, with its closing level of 1128.82 representing an 8.0% advance over five days.  Breadth was fantastic as well: 22 of 24 stocks advanced; 16 stocks rose by more than 5.5%; and the top 5 performers gained an average of 24%.  So is this a real recovery, or is it just a dead-cat bounce?  It must be real, because the alternative is just silly; why would I believe that dead cats bounce when I can’t get live ones to?

Separately, now that the 990.14 close on August 22, 2011, looks like at least an intermediate low—we’re up 13% since—I want to point out something very strange.  You probably can’t guess the 2010 low on the FSX—it was 885—but I bet you can guess the date.  That’s right: August 22.  What does that tell you?  It tells me something that I’ve known for a long time: summer sucks.

Advancers

  • Marcus (MCS) +36.7%.  Holy snikies, what happened here?  Marcus has been dead money for the last three weeks, completely sitting out the furious FSX rally from under 1000 to 1128.  The explanation could not be simpler: school started.  Marcus loves teaching, even when he hates to love it.  He also loves to hate it, and when you can flip that passion coin and nod your head whichever side comes up…do you really need anything else from your work?  Okay, you probably need a paycheck, but what else?
  • MSTR LEE +26.1%.  I declared war on myself this week, something I’ve had great success with in the past.  In response, LEE jumped 35.5% and MSTR added 16.7%.  If you haven’t crushed the part of yourself that’s crushing you, I can recommend it highly.
  • Nicole L. (COL) +17.3%.  This shocking surge to the upside by the normally-staid Nicole marks a turning point in her war against Netflix.  After trading around $210 on Wednesday, Netflix stock (NFLX) had plunged to $155 on Friday, a two-day decline of more than 25%.  It seems that subscriber unrest is hitting the company’s bottom line (along with some dubious capital spending plans) and NFLX, which traded above $300 before the rate increase, has unexpectedly shared its customers’ pain.  Nicole has become the universal symbol of that unrest—the modern-day Joan of Arc for an entire nation of people who don’t want to pay extra for DVDs.  She should just steer clear of the modern-day version of getting burned at the stake, whatever that might be.
  • Katie (CATY) +9.8%.  Lackluster trading throughout the week even with the expectation of a long-overdue hair appointment today, and then a powerful rally on the back of a cancellation?  Maybe the full-on Italian granny look isn’t going to be as hideous as I think.  I personally expect to be devastating, with a long silver mane and, please oh please, jowls and a turkey neck like my Great-Uncle Thad.
  • Brinkley (BCO) +9.5%.  So that’s it: he’s running a modified Schlieffen Plan.  He realized that my greatest fear at the start of Operation Simba was that he would overthrow me during the day when I can’t call in reinforcements (I can, of course, but my pride—and Katie’s commute—make the proposition an unattractive one).  He concluded, therefore, that it would be useless to send the main body of his force against me in anything other than an exploratory or diversionary capacity.  And Katie and I foolishly assumed that he would need to sleep at night as much as or more than his mother—just as France and Britain assumed Germany would respect Belgian neutrality.  It seems that we were wrong, and he can do with far less sleep than planned for in our worst-case scenario.  If he breaks Katie—the equivalent to the German reduction of the fortress of Liege in August 1914—I will have to reinforce her, even though I have no divisions to spare.  Of course, the Schlieffen Plan failed, in no small part because Belgian fortifications slowed the Germans long enough for French commander Joffre to keep his arms around the situation and direct an orderly retreat.  All Katie has to do is hold on a little longer—just a year or so.  Two, max.
  • Marisa (MOLX) +9.5%.  A classic cat exchange went down last night.  Picture it: while Katie and I are trying to get Brinkley to go to sleep—he is still screaming his refusal at 9:30—Lulu is frantically chasing a cough drop around the bedroom.   She swats it away, slinks up on it, pounces on it—she’s just going Ricky ‘The Dragon’ Steamboat all over that mentholated sissy.  Then Marisa, hearing the racket upstairs and thinking there might be something thereabouts what needed killing, saunters into the room.  She takes in the scene—Lulu astride a humiliated lozenge—and sidles up to her fellow cat.  Marisa sniffs Lulu’s face dismissively, as if to say, “You show that cough drop who’s boss—loser.”  Then she real-cat-walks over to the closet to explode the litter box with the digested corpse of some murdered bird.  For her part, Lulu goes right back to bullying the medicine.  Because you know who’s the real loser?  The cough drop.
  • Charlotte (ICE) +9.2% and Justin (WOLF) +8.1%.  Team Charlotte is dead; long live Team Charlotte.  After this week’s action, Justin (+13% year-to-date) and Charlotte (+4.9%) have both joined Nicole B. (+25.9%) in the green for 2011.  That leaves only Zero, down 37% for the year.  If you see him, give him a hug.  I’d do it myself but for fear that my own bear swoon is contagious.

Decliners

  • Winston (HWD) -1.0%.  Football’s back and that means less attention from Mario and Dark Mario.  What’s more, rumors of comical doggy allergies kept the bulls on the sidelines all week.  Just the thought of poor Winston cursing the endless fantasy drafts in between sneezes made me want to call in a buy order myself.  But of course I didn’t.
  • Reagan (REGN) -8.3%.   It seems the market is realizing that Reagan won’t be eligible to run for President until 2040.  The market is forward-looking, yeah, but there’s a lot of zeros in that discount factor, know what I’m sayin’?  Before 2040 Reagan plans to be a volcanologist and a general, which in my opinion gives the stock plenty of room to run.  A healthy pullback never hurt anyone.
Name Ticker 9/16/2011 Change
Brinkley BCO $25.91 +2.24
Charlotte ICE $124.98 +10.50
Dustin DST $45.65 +3.15
Icarus FLOW $2.46 +0.32
Jenny LEN $13.80 +0.32
Justin WOLF $2.95 +0.22
Katie CATY $12.60 +1.12
Lee MSTR $121.60 +17.37
Lee LEE $0.84 +0.22
Lisa LSI $6.65 +0.10
Lucas LEI $1.90 +0.10
Lulu LULU $57.76 +2.70
Marcus MCS $11.25 +3.02
Mario T.E. PBY $10.31 +0.73
Mario T.Y. SUP $16.47 +0.66
Marisa MOLX $21.80 +1.89
Nicole B. NI $22.18 +1.16
Nicole L. COL $56.21 +8.31
Reagan REGN $60.20 -5.42
Ruby RBY $4.59 +0.33
Wilson WILC $6.32 +0.04
Winston HWD $13.46 -0.14
Zero FRZ $1.73 +0.06
Zondro ZQK $3.85 +0.22
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1 Comment »

  1. Dang, y’all. And you’re analysis is pretty spot-on. School starting up has wrecked me, but I also have moments when I’m the happiest. The kids are pretty good this year, too, which I have now jinxed by mentioning it. They will set fire to me and the room on Monday.

    That FSX sigil, though. It’s for real.

    Comment by Marcus — September 17, 2011 @ 16:46 | Reply


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