Friday, January 23, 2009

Energy Stocks Look Like They Have Bottomed

Another weak open in the stock market, but the last few big selloffs have recouped much of their losses by the end of the day. I would not be surprised to see a repeat today.

Earnings reports continue to roll in, but more important than whether or not the company beats estimates is how the stocks react. To wit:
  • GE matched estimates and also said it is committed to its $1.24 dividend this year, which many investors had been concerned about. Nonetheless, the stock is down another -5% this morning.
  • Conversely, Schlumberger (SLB) missed estimates by a couple cents, but the stock is surging +6.6% higher, as it looks like energy stocks may have bottomed in the near-term. Oil is lower this morning, but the whole energy sector is trading higher.
  • Also, Harley-Davidson (HOG) missed estimates by a wide margin, and the stock is down. Ditto for Capital One (COF).
  • Google (GOOG) beat estimates by 15 cents last night, and showed very solid growth. The stock is rallying +5% today, and is nicely above its 50-day average now.
  • And talks that Pfizer (PFE) is looking to buy Wyeth (WYE) has the latter's stock jumping nearly 10%.

One of the reasons for yesterday's weakness, and this morning's as well, has been the chatter that China is manipulating its currency. Treasury Sec.-elect Geitner made comments about this yesterday, and this morning there was an article in the NY Times about it. Markets don't like this feather ruffling.

Asian markets were lower overnight. The dollar is bouncing today, weighing on commodities (except gold, which is higher). The 10-year yield is spiking to 2.66%, right at its 50-day average. And the VIX is a bit higher to 48.6.

Trading comment: Yesterday I added to some my energy/ag ETF positions. And I am still holding my index ETFs. I think the market has gotten oversold, and I like that the S&P has held the 800 level all week, despite some negative headlines. Given the magnitude of the pullback this month, I am anticipating a nice bounce, even if it is just a short-term bounce.



At 1:35 PM, Blogger VC said...

What about the rising unemployment? I have to think that with companies like Microsoft and Harley Davidson reporting layoffs, the January unemployment numbers set to release on Feb 6th will crush any rally and bring the market down even more.

At 1:50 AM, Blogger Celal Birader said...

Hello Jordan,

The title to this post strikes me as a very bold statement.

Is there anything in particular that gives you the confidence to call a bottom in energy stocks ?


At 4:29 PM, Blogger J. Kahn said...

Celal, my work, which incorporates fundamental, technical, and sentiment analysis, points to a tradeable rally in the energy patch. Then its back to the sidelines--

At 4:30 PM, Blogger J. Kahn said...

VC, I think everyone already expects a bad jobs report. Look at today, huge layoff announcements and the market rallied nonetheless.

The jobs #s could weigh on the market any given day, but in the end, unemployment is a lagging indicator.

At 6:53 PM, Blogger VC said...

I wouldn't consider that a rally because the market was up over a 100 points today and then dropped and barely closed positive. Do you think that the 9-10% unemployment we could see is priced into stocks?

At 8:02 PM, Blogger Celal Birader said...

I'll keep looking out for your trading tips. Thanks Jordan.


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