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The SP 500 Index has been holding up, but is likely about to break. The weight of all the growth stocks and former MOMO plays underneath it that are falling apart will soon take the index down to the 1800 area if not 1775 we think. This could occur over the next 10 days or so. BUILD A LIST OF STOCKS TO BUY!!… READ ON…
Stocks like Twitter, Facebook, Tableau Software (DATA), Solar City (SCTY), Biotechs and more have been slammed in the past few weeks while the indexes mask the issues. See some charts below for our thoughts. BIOTECH not quite at a bottom, but about 7% away index wise we think (See chart below also)
What about GOLD? We warned about the frothy nature in our March 16th weekend report in black and white. We said too many people were in the trade and it was trending too popular and was likely to decline/correct. Gold is off about $90 an ounce in 10 days since that mention. What next? Probably 1260′s before a real bottom in our opinion
In short, too many traders were too giddy on growth stocks and margin levels were at 5 year highs several weeks ago. We suspect the market is going through a normal revaluation and re-evaluation of fair value right now. We also suspect traders are getting margin calls and learning another lesson.
So what may work near term and ahead?
Coal stocks are beat into the ground. This week we noted Goldman Sachs, Jefferies, and other major brokerage firms downgrading them across the board. Particularly we are interested in Arch Coal which is forming a rooftop bottoming pattern on the long term charts. If you are a contrarian, we think when Wall Street yells at you to sell something (Like they did with Gold in early January), that its probably time to buy.
Emerging markets got their butts kicked in the past months, but now may be getting some love
We would build a list of strong companies and watch sectors for bottoming signals. Biotech was way overdone, but there are some very promising companies who we would love to buy cheaper in the next 7-10 days. There could be a serious snap back rally in the better names once the sector completes the washout. The largest correction in over 12 months.
Gold stocks like MUX which doubled from our 1.85 mention in late December to 3.70, and now 2.45 are getting interesting… have a list of those to buy if Gold gets near 1265 or so.
That’s all for now, but prepare for an index correction ahead and watch that 1847 key line on the SP 500