The Proper Way to Juggle
Dead Cats
By Jeff Clark
January 8, 2009
We couldn't have scripted it better.
Last month, we took a look at the dollar, decided it was ready to fall, and bet stocks and commodities would rally. That's exactly what happened.
From top to bottom, the U.S. Dollar Index dropped 12%. The S&P 500 gained as much as 13%. Gold was up 17%. And oil rallied 15%.
Now, however, the dollar is showing some strength while stocks and commodities are acting tired. This action, of course, begs the question, "Is that all there is? Or can we squeeze a little more of a rally out of the stock market before the bear takes another swipe at it?"
Here's where it pays to know a little bit about dead cats...
You see, on Wall Street, "dead cat bounce" is an old phrase used to describe the action in a beaten-down stock. The thinking is, if you tossed a dead cat off the top of the Empire State Building, it would bounce when it hit the ground. Then it would drop back down and hit the ground again.
Applying this phrase to the stock market, the term "dead cat bounce" indicates the action of a stock that has fallen from lofty levels, hit bottom, and then bounced sharply. Eventually, the stock will fall back down and hit bottom again.
To me, the action in the U.S. dollar looks like a dead cat bounce...
So the greenback ought to fall back down to last month's lows, or perhaps a bit farther. And that should be enough to reignite another rally in stocks and commodities for at least the next month or two.
Of course, you could argue that the action in just about every asset class resembles that of a dead cat bounce. You'd be right. Indeed, trying to trade this market is like trying to juggle a bunch of dead cats.
Actually, it's more like watching someone else juggle them. Then wagering on which one will drop first.
I'll bet the dollar hits the ground first – which means the other cats ought to stay airborne a while longer.
Best regards and good trading,
Jeff Clark
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Mall Vacancies Hit 10-Year High
Vacancies at U.S. malls and shopping centers approached 10-year highs in the fourth quarter, and are set to rise further as declining retail sales put more stores out of business, research firm Reis Inc. said.
Regional mall vacancies rose to 7.1 percent last quarter from 6.6 percent in the third quarter. It was the highest vacancy rate since Reis began tracking regional malls in 2000, as well as the largest quarter-to-quarter jump in vacancies, according to New York-based Reis. Read on...
World's Largest Aluminum Producer Axes 15,000
Alcoa Inc. announced the elimination of about 15,000 jobs, more plant closures, plans to sell assets and a 50% cut in capital expenditures to contend with the sustained recession
The moves raise the question of whether other companies that have cut costs also will feel the need to dig deeper. Alcoa, the world's largest aluminum producer, announced a round of cost cutting in October when demand for commodities and the availability of credit began to fall. WSJ ($) Read on... |
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Oil drops 8% yesterday... back below $45. |
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Low oil prices help airline JetBlue hit 52-week high... up 141% since last July.
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Leading hospital bed manufacturer Hill-Rom hits lowest point since April 2008 spinoff. |
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Earnings today... Apollo Group, Chevron, Shaw Group.
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Last |
Change |
52-Wk |
| S&P 500 |
920.16 |
+1.87% |
-36.42% |
| Oil (USO) |
35.34 |
+6.77% |
-54.91% |
| Gold (GLD) |
86.26 |
-0.30% |
+0.81% |
| Silver (SLV) |
11.34 |
+1.25% |
-25.81% |
| U.S. Dollar |
81.50 |
+0.43% |
+7.44% |
| Euro |
1.39 |
-0.50% |
-5.67% |
| VIX |
37.67 |
-5.82% |
+67.50% |
| HUI |
305.41 |
+0.99% |
-32.03% |
| 10-Year Yield |
2.30% |
0.06 |
-0.95 |
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| Company |
Sym |
Industry |
JetBlue |
JBLU |
airline |
Zion Oil & Gas |
ZN |
oil & gas |
|
| Company |
Sym |
Industry |
M&T Bank Corp |
MTB |
bank |
Lions Gate Ent |
LGF |
entertainment |
Hill-Rom |
HRC |
medical equip |
Texas Capital Banc |
TCBI |
bank |
Hallwood Group |
HWG |
textiles |
Steelcase |
SCS |
furniture |
|
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