Friday, July 28, 2006

Material cyclicals give false hope.

While moving today I heard from Chuck that the market was up big and FTK was down a bit (you can't go up 25% everyday). I knew GDP was released today and waited to get to my final destination before trying to find out what the nation's growth was.

Upon hearing that the market was up big I instantly assumed that the GDP number was in-line or greater than expected. I also assumed large volume would be involved because I feel the smart money fears an economic slowdown more than anything else. I instantly started to reassess my bearish stance and thought of new stock screens and possible small cap candidates (I think AFAM is interesting, BTW).

Well low and behold I found out that growth was less than expected and volume on the gain was rather weak. Rather than questioning my bearish outlook, I was now starting to feel that my predictions for my short candidates (TIE, X, PD and other cyclicals) were really starting to look good. All of these are now near or above their 50 dma. Remember to not short until 5 to 7 months after the peak and to wait until 3 or 4 50 dma price breaks.

I'm tired from moving, and I'm going to bed.

No comments: