Equities Generals Should Be Shot

We've been discussing the past few weeks how this correction has missed "The Generals" (the leadership stocks). While the market went through a horrid January, many of our stocks were unscathed. Which had me worrying - it's hard to get behind a shorter-term bottom until the Generals are taken out back to the barn, blindfolded, given a cigarette, and then shot.

In a bull market, I want to be buying stocks that are holding up during a downturn because there is no pattern that they indeed need to be shot. In a bear market, I take the opposite tack - I assume they are going to be shot. So this is why we have not built up any 3-4-5-6% type of stakes the past month in stocks that had "held up the best". Indeed, I've had one measly position over 2% on the long side. (which is being sand blasted of course).

I am listing below names I consider either the market's leaders of the past 6 months (large cap) or our personal leaders (small & mid cap). You can see them in various stages of true or potential duress while the traders run into dry bulk shippers and homebuilders. Very reminiscent of what we saw many times in 2008; a "rotational" correction where sector after sector took their turn getting hit.

Eventually I would like to make many of these major positions (4%+), but I'd prefer to see them take multiple bullets first; as they fall, we'll begin throwing in layers of positions realizing we won't catch the bottom. These are among the best fundamentals and with charts that held up the best through the carnage of late, but I'd expect some/many to take some hits on the next leg down.

That said, this market just seems on hold until Friday's labor report. Hint to market: it is going to be bad; why are we waiting around as if some magic number will change the economy? And then when we are done with Friday we have to wait until the magic bailouts that will be announced next week from D.C. Hint to market - we are on "savior announcement" number 47. The first 47 failed. Are we really going to play this song and dance on #48, 49, and 50? Getting very old.

And then maybe someday in the future we can get back to a normal market.

Taking the first bullet(s):


Blindfolded?

Being walked to the barn?

Comments

[rber:]

Traders continue to be busy little beavers trying to make something from nothing. In the meantime mom, pop and joe plumber's financial brain sectors are frozen by denial and confusion. Another fire (catalyst) is what is needed to get where we've gotta go and the govy stands on guard with fire extinguishers. Seems right now we have nowhere to go but, nowhere.

Feb 04 10:41 AM

[Jake Berzon:]

Looks like everybody who is not a day trader is just sitting on the sidelines waiting to see what will happens next.

Feb 04 10:56 AM

[TraderMark:]

This is a strange title for my piece ;)

Feb 04 11:34 AM

[Mark Anthony:]

Hello, Trader Mark:

I have been following your writtings as you wrote a lot about different things. But it is odd that you have COMPLETELY MISSED the biggest story lately, and hence missed the biggest opportunity in the market today.

Why you are not saying anything about dry bulk shipping lately? The BDI index is up 12 consecutive days in a row and today up another 15%. That alone should be a big headline news. Read here why that's huge:

seekingalpha.com/artic...

Good luck with your trades. You surely have a lot of followers.

Feb 04 12:59 PM

[RSAAKS:]

I thought the real generals in the preceding Bull market were some tech heavyweights line AAPL, RIMM, GOOG, many oils like SLB RIG, fertilizers and Ag stocks POT, MOS and MON etc. Some names you include like WMT, MCD and XON are as much defensive names as they are generals and thus not shot down as badly

Feb 04 01:03 PM

[TraderMark:]

I think thats just daytraders fooling around. BDI in 2005-2006 was in the 3000-5000 range. Now its at 1100 and I am supposed to be jumping in on the global growth reinflation trade?

Fun for daytraders - not so fun for me. When one can buy these and not risk falling 20% the next day I will be in. For now its just for gamblers.


On Feb 04 12:59 PM Mark Anthony wrote:

> Hello, Trader Mark:
>
> I have been following your writtings as you wrote a lot about different
> things. But it is odd that you have COMPLETELY MISSED the biggest
> story lately, and hence missed the biggest opportunity in the market
> today.
>
> Why you are not saying anything about dry bulk shipping lately? The
> BDI index is up 12 consecutive days in a row and today up another
> 15%. That alone should be a big headline news. Read here why that's
> huge:
>
> seekingalpha.com/artic...

>
>
> Good luck with your trades. You surely have a lot of followers.

>

Feb 04 06:52 PM

[TraderMark:]

you are correct sir

But that was up to summer 2008. I was looking at the leaders since...


On Feb 04 01:03 PM User 55065 wrote:

> I thought the real generals in the preceding Bull market were some
> tech heavyweights line AAPL, RIMM, GOOG, many oils like SLB RIG,
> fertilizers and Ag stocks POT, MOS and MON etc. Some names you include
> like WMT, MCD and XON are as much defensive names as they are generals
> and thus not shot down as badly

Feb 04 06:53 PM

[Moon Kil Woong:]

Thanks for your review. It looks like they are all bouncing around in a trading range with the market. Thus, if that's leadership, no wonder the market can't make a decent upside any longer. Well, at least it's not more charts showing steep declines.

I am with you on the fact that the market is hoping for more government support is quite pathetic. If market participants were smart ,they should be hoping for less government intervention and more enforcement of existing regulations, accounting practices, and the law. It may be painful short term but that's the only way we get out of these market doldrums once and for all.

Feb 05 02:28 AM