- Those who wish to succeed must ask the right preliminary questions.
- Aristotle
Going Up
The word elevator when used by Wall Street refers to the price action of a stock. In our sound byte world, the media will not detail the most important aspect within the word. When the stock market rallies like it has been doing since the March lows, it is a slow grind upward. It is like getting into the elevator on the ground floor. Everyone has a stop. This is the price that they are happy with their investment. The exception to this is the example of only a few riders in the cab as it climbs. These are your big hedge funds that move an individual stock, sector or an index. They can push a market higher than anyone could imagine. This is why you can get some no-name getting ink saying, "Dow 50,000." Like in many expensive high-rise buildings, they have their own express elevator to the penthouse. This also reflects the present state of the market. The market has reached highs that most would could not foresee. It is like trying to build the tallest skyscraper. The architect realizes that he will be a few feet short of the record. So, he adds a cupola or spire. He sets the record just like our stock market.
Going Down?
In days of yore, upscale buildings actually had an attendant that worked the elevator. When it reached the top floor, he could be heard saying, "Going down." This pertains to our piece on stock market prices. As stated, the up cycle is generally a slow grind with many support and resistance points. However, when the elevator goes down, you can almost feel a "G" with the force. It drops rapidly like it is out of control. This is the details that get overlooked when the media reports on the prices of the stock market on a daily basis.
Apple and Tesla...
are the two big dogs that have moved the market to record highs. Although Tesla is not included in the S&P 500, many expect it to be added and quickly. This aspect is deep behind their purchase. If Tesla does get added, it will be bought by funds to which will drive the price even higher. Elon Musk had this point in mind as he recently split the shares. The company was the most shorted stock in the market. They lost and BIG! The electric car company is up 435% since January and looking back, it is up 891% for one year. Wish I had it? Of course, with a PE ratio of 1088, I never would buy any stock like that. I am what the market classifies as a
Weak hand...
Be truthful with yourself. Tesla hit a high at $502 and fell last week to $375. Could you take that pressure? This is the present state of our stock market. Dear Reader, it could get worse. As expected and indicated, the market will correct. It is possible that Tesla could retrace to its breakout price. Are you sitting? Tesla could fall to $173. Ouch!
The price of everything that you might want to invest or buy is selling at Zimbabwe price levels. Apple reached an all-time high of $137 and closed last Friday at $120. It touched $101. Could you handle that heat? We are talking a lot of money that is multiplied by the number of shares that you bought.
I have concentrated on these two firms because they have been the driving force for the elevator to rise. If you recall, the FAANG stock group was the reason behind the market rally prior to the flu crisis. They have been mostly range bound. Microsoft moves from its high at $232 to $204. Amazon made a new all-time high at $3552, but fell with the market to $3144. That could give you a heart attack. It can get worse. It has a high volume low at $2401. Any trade problems with China or talk of taxing internet sales and $2401 is a given. Netflix hit $575. It too is range bound, but the size is huge. The bottom of the bracket is $450. Can you see my point about prices? Everything is expensive. Always keep in mind the volume at highs and lows. The market was down 2.2% on Friday before big money scared weak hands. Nasdaq was off by 5% before making a comeback. The media was quick to say that the falling of the unemployment rate to 8.4% was behind the price movement. Our Economic Evangelist says, "Permanent job losses have risen to 3.4 million and the market has not priced this reality." Buyer beware!
Rare phenomenon
The purpose of trading firms is to get you to buy. They are selling. This is why it is very rare to have an analyst recommend selling a company due to a negative outlook. However, we have tracked 37 analysts that follow bigger firms. The following are firms that they have designated as sells. Who is at the top of their list? TESLA.
List: Exxon, Southern Copper, Walgreens, Paychex, Hormel Foods, Public Storage, Tiffany, Occidental Petroleum, Carnival, Gap, American Airlines, Rayonier, Xerox, Park Hotels and Resorts, Chesapeake Energy, Nordstrom, McCormick and Co, and Brown-Forman.
Last thought
In trading, there is a pattern called, "Three black crows." This is where a stock shows three gaps to the downside in price. Needless to say this is not good. However, this is what usually happens to a stock with this pattern. By the way, we mention this because this pattern is appearing within stocks at the moment. Anyway, there is a short period of consolidation after seeing the three black crows. Then, there is a surge back to the original level. But and this is a big BUTT, the elevator going down comes. If you ride it down, you will want to die. Don't! Like Kenny says, "Know when to fold them!"
