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Gold fades, Philly Fed weak, sequester incoming. Bull market over?

Written By | Nov 13, 2013

WASHINGTON, February 21, 2013 — After yesterday’s late-afternoon swoon–which was so widespread it looked almost like capitulation–the downdraft in the stock market continues this morning, picking up pretty much  where it left off. As of 11 a.m., the Dow is down between 50 and 60 points and looks like it’s headed lower.

The tech-heavy NASDAQ and the S&P 500 are also looking anemic or genuinely ill, depending on your point of view. Pundits blame the continued bad action in gold, the weak Philly Fed industrial activity report, and, of course, the looming March 1 sequester which, given the ongoing, nonpartisan Congressional love-fest (irony alert!), is the closest thing to an ironclad guarantee we’ll ever likely see in Washington.

Is the big 2013 stock market rally over already? Is a new bear market imminent? Are we all going to die? Answers: Probably not yet. No. And yes.

The financial punditocracy is all over itself with nonsense this morning, speculating on the above likelihoods and more. Also added to the soup: now it’s Google that’s the new tech god, supplanting Apple as the hedge funds’ latest love affair (along with AIG) and now getting optimistic estimates of $1,000 per share, perhaps hitting that number within hours. (We’re exaggerating a bit.

Meanwhile, poor Apple continues to swoon, even with loads more cash than Google and the likelihood of new products on the horizon that no one is yet expecting. But once the Street has decided that your company is so over, there’s not much you can do as irrationality reigns extreme. What’s really likely here: Google will be the next on the doom list. Something will slow its for-sure ascent to $1,000 per share and it will be over forever for them, too, just like Apple. As we often say here, wash, rinse, repeat.

What’s really going on? Profit taking mixed with a few irrational fears. The big market downdraft over the last couple of days is probably healthy for bulls as long as they don’t let it get out of control. The VIX–a measure of market volatility–is soaring right now, but VIX spikes come and go. The market is already short-term oversold. It will probably get worse before it gets better, but we also think that the dreaded sequester will soon prove to have been a non-event.

For better or worse, the sequester has been pretty much offset by the Hurricane Sandy package of goodies and trade union post-Christmas gifts. What probably has made things worse, stock wise, was the Fed’s equivocal statement yesterday which wondered openly whether QE forever might finally need to end sooner rather than later.

Other stuff swirling in background is weirdness in oil prices as inventories of crude bulge while gasoline has been in tight supply–largely due to refinery outages and downtime for the annual spring switchover to the ethanol-driven annual “green” fuel debacle.

We’re still planning for one or two updrafts in the market before it’s time to Sell in May and Go Away.

Today’s market barometer:

Given the observations above plus all the uncertainty, we continue to sell down to where we’re comfortable again in all our portfolios, although we’re holding out against dumping every last MLP and REIT in spite of somewhat uninspiring news in those sectors. Ditto our minimal but likely-to-grow utility holdings.

Now that our mandatory Schwab holding period is over, we’ll be taking magnificent profits in our small holding of Norwegian Cruise Lines (NCLH). They announced good earnings this week, kicking the stock to its peak early in the week. Some brokerages are putting it on their recommended list, particularly after the ongoing debacle with rival Carnival Cruise Lines (CCL). But it’s been a bit weak for the last two days, so we’re selling this morning to net an approximate profit of 61%, about as good as you’ll get in this market. We regard this one as luck more than skill, but we’ll take it.

Likewise, we’ll probably dump small, new refiner Alon USA (ALDW). This is our second excursion here since we sold our initial IPO shares for a nice profit. We’ve got 21% now, a little less than we’d have netted Monday when we should have sold, but again, given conditions, it’s time to go, although we may be back again.

Other positions are under consideration for a sell, including a couple of China-heavy ETFs which are now under pressure given the likelihood of China itself pulling away its current stimulative punchbowl. But we’re lightening up, regretting that we didn’t start that on Monday but not crying over the profits (and occasional losses) that we still have. The object is to keep most of the profits before the Big Boys take them away, which it looks like they’re trying to do right now.

That’s it for today. Tomorrow’s material will be iffy as we are going on travel for the long weekend. But unless Nirvana suddenly materializes in the economy–highly unlikely–we expect tomorrow to be sloppy again as we head into a weekend where bad news headlines can always happen.

Have a good one.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times. 

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward. 

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any ar500ticle under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Follow Terry on Twitter @terryp17

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Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17