| Look Out Below! |
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| July 8, 2008 |
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July 8, 2008
"Look Out Below!"
Today has been unbelievably volatile, so I wanted to send out this alert to make sure you have the latest news. Within the first minute of pre-market trading, over 1.1 million shares traded on the QQQQs. Oil, too, saw a spike in volatility today with what appears to be the start of a very nasty rollover across the entire commodity sector. My first instinct was to start shorting and issuing alerts to my subscribers, and I wanted to include you too! If you don't have a problem with very fast moving markets, brace yourselves for the ride of your life. This summer will be anything but boring, especially if we consider the brewing rotation out of commodities! Stay tuned.
POP!
Our charts at Trending123 suggest we've entered a new bubble—an oil bubble. It wouldn't surprise me if we've already reached the top on oil. It's only a matter of time before we see another major turning point, perhaps even within the next month. If that happens, of course, I expect all stocks throughout the entire commodities sector to follow suit in this bubble mania. Every time a sector or index reaches epic proportions, it has led to the complete collapse of everything within that sector or index. Look out below! It's unbelievable how history repeats itself…
If you were around at the turn of the 21st century, the word "bubble" may stir some unsettling memories—especially if you were heavily invested in technology stocks. When the tech bubble burst in early 2000, the NASDAQ saw a 77% decline from its high to its low in 2002. That drop completely squashes the S&P 500's 45% financial sector plunge. The fallout, though, is just as painful.
That's the thing about bubbles; if sectors and indexes grow too rapidly, they pop Share prices fall dramatically and companies go out of business. Just look at some of the most recent examples:
- Japan's Nikkei Index boomed in the 1980s, as real estate prices soared and stocks increased 100-fold. But the government raised rates and within months the Nikkei index crashed over 30,000 points.
- The dot-com bubble, which peaked in March of 2001, was perpetuated by rapid growth in the new Internet sector and other tech-related fields. Stocks prices took off, fueled by speculation and widely accessible venture capital. The focus on increasing market share as opposed to building up the bottom line eventually led to a bursting bubble.
- Housing prices in the U.S. peaked in 2006 and have since declined significantly. Compounded by the credit crunch, the bottom to the mess in financials is no where in sight.
Oil stocks are already pulling back. Oil Service Holders (OIH) revisited its April prices today and it was trading at all-time highs just last week!
Remember: The charts don't lie. And the charts indicate that oil and the greater commodities sector are in for a major pull back. Sign up today for my latest recommendations on how to play this unfolding trend!
50-25-25
I've told you many times that a stock's movement is influenced by a number of different factors. As a general rule, I'd say 50% of a stock's movement depends on the index, 25% on the sector and 25% on the stock itself. This weighting helps to isolate patterns and determine the direction a stock might be headed.
My personal mission is to make you aware of these patterns, so when I send out alerts on specific stock movements you'll be ready to play them. It's important that you understand why the money is rotating out of one sector and into another, and why some stocks fall out of favor more quickly than others.
Before I sign off today, I wanted to reassure you once again that the market isn't as bad as it appears. If you look at a chart of the large caps it should be quite clear that you can't spin them to be bullish. That said, large caps tend to hold up the best in the worst economies. High beta stocks, tech stocks, small and mid caps will always underperform the large caps on a huge scale if the economy is really bad. This time around, though, that just isn't the case. Maybe times have changed, but experience tells me that as long as there isn't a flight to safety in the large caps, it isn't the end of the world as we know it.
Be sure to tune in over the next few weeks as I drop the names of some stocks that are poised to take off as money rotates out of commodities and into tech! Sign up today!
Sincerely,
John Lansing
Trending123
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