Weekend Strategy Review February 6, 2015

Posted by OMS  at February 6th, 2016

The Dow fell 212 points on Friday, closing at 16,205.   It was down 261 points for the week.  The NASDAQ was down a whopping 146 points on Friday and down 251 points for the week. 

NASDAQ technology stocks got hammered.  Several months ago I talked about how some of these technology stocks with little or no earnings would be dangerous places to be once the market started to decline.  You could see it coming.  The folks on CNBC had quit talking about companies that actually make things, like Caterpillar.  They were too boring.  No commentator likes to talk about stocks that are going down.   Even guys like Stu Varney on FOX Business were touting the new concept technology stocks.  They couldn’t stop talking about how these companies were going to revolutionize how things were made.  Companies like 3D Systems (DDD), who were going to make things by printing them.  Really?  I actually heard one commentators say that if you needed something, all you needed was a 3D printer out in your garage and you could print it.  About that time, DDD was pushing 98.  Now it’s under 9 bucks.  Maybe it can’t print everything?

So when these printing stocks started to decline, they moved on to touting other high tech concept stocks like Twitter (TWTR) and Linkedin (LNKD).   Yesterday, Linkedin Corporation (LNKD) fell 43.6 percent, losing $83.90 per share to $108.36.  Hmmm?   Maybe yesterday’s poor jobs report had something to do with it.  But maybe investors finally noticed that the company had no earnings.

Same with Twittor (TWTR).  Last April it was a $52 stock.  Yesterday it dropped over 7 percent and is now trading under $16.  And while I don’t see a direct link between Twitter yesterday’s horrible Jobs Report, like I do for LNKD, I still see the same earnings.  Zero!

One of the reasons I decided to talk about this today is because during the week, I received a call from a friend who told me that he is still fooling around with Facebook (FB).  He told me that he made some money when the stock popped over 10 points last week.  I congratulated him but didn’t say anything else.  I never comment on stocks that individuals own when I talk twith them.  I just don’t. But when put the phone down, I made a note to myself that I needed to say something about it on the web site this weekend.

I’m not going to say anything bad about Facebook’s web site.  As I said before, I don’t use it.  But Marcia and many of her friends do. The thing I don’t understand about FB is its business model.  With a stock like Twitter, I could actually understand its business model.  But early on, I decided that it wasn’t for me. I didn’t want to be involved with anything that depended on how many times a thirteen-year-old clicked on an add.  That was a no brainer.  But with Facebook its more complicated. And while I see lots of people using it, I also see almost the same exact thing I saw with DDD, LNKD, and TWTR.  And even after Friday’s hammering where the stock dropped 5.8 percent, it still has a has a P/E of 80!!!…with almost NO earnings.

Anyhow, I just wanted to get this off my chest.  Folks, if you still own concept stocks like FB or TWTR with high P/Es and little or no earnings, please be careful now.  Despite what the commentators on CNBC and FOX are telling you about how wonderful all this new technology is, the fact remains that we are in a Major Bear Market.  And if I’m right, this Bear will probably last for years. 

The current wave structure still appears to be part of corrective wave 2 within Major Wave 2 up.  Nothing has changed with the pattern, although it appears that instead of a simple a-b-c correction for minor wave 2 up, it has morphed into a 3-3 5 flat or zig-zag.  Like I said yesterday, these corrective patterns are never simple.

The Tide remains positive and the Dean’s List remains negative.  However, after yesterday’s decline, the Money Flow on the NASDAQ (QQQ) has turned negative.   The Money Flow on the Dow (DIA) remains positive. So the signals on the cockpit remain mixed.  With mixed indicators, all I’m doing now is scalping.  I’m trading small positions, taking profits when I get them, and exiting the market before the close.  It is way too risky now to be holding significant positions overnight. 

The current pattern still suggests higher prices. But now that the Money Flow indicator on the NASDAQ has turned negative, I would be very cautious about being long technology.

BTW, GDX rose another 0.90 cents on Friday to 17.05.  But more importantly the pop put the stock over the 200 day moving average on the weekly chart.  This is the first time that GDX has closed above the weekly 200 since July 2014.  And it did so on really positive Money Flow.  My indicators are telling me that GDX is a bit overbought now, so I’ll be watching it closely in the weeks ahead.  I would love to see it pull back and form a Blade.  If it does, I’m going mining.

That’s what I’m doing,

h

Two other comments:  I saw that after Thursday’s Democratic debate, Bernie’s polling numbers were approaching Hillary’s.  I thought this was amazing, given that his is an avowed socialist.  I couldn’t believe what I was hearing when I saw a FOX reported go to the streets of New York City and ask people if they knew that ‘The Bern’ is a socialist.  Most did, but didn’t know what a socialist was   Hmmm?  So this weekend, if you have children or grand kids, please take the time to explain it to them.  Show them the pictures that are coming out of Greece this weekend. Give them some home schooling on what socialism is all about.  People rioting on the streets, throwing Molotov cocktails, 35 percent unemployment for adults, 50 percent for people under 25. I can go on and on.  This is what socialism is.  It didn’t work in the old Soviet Union.  It’s not working now in Europe.  I find it amazing that so many college kids think this is a good idea.  Makes me wonder what these kids are learning for a $150K college education?  Pretty scary stuff if you ask me. 

Market Signals for

02-08-2016

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