I’ve got this nagging and uncomfortable feeling in the pit of my stomach today. Sure, I’ve been recommending and buying MMI since its break below 30. In fact, I bought it twice and lowered my average cost to the $26 area. Many of our subscribers have held the stock through its tumult, but I stopped out and some stopped out with me. And so now that Motorola goes to Google at a 55% markup, I feel a little sick. I followed my discipline and lost out. That happens sometimes.
Maybe that is why I am feeling suspicious of the markets sigh of relief and low volume recovery. The DXY is plunging today and we will have ZIRP forever, so banks and the entire market should bounce regardless of the flatness of the yield curve. Right? Right? Right?
My summertime target was a test of SPX 1200. We hit it and plunged 100 SPX points and then recovered most of that breakdown in less than an hour and a half. And just like that, the huge volume selling disappeared and is being called a selling climax. I disagree wholeheartedly.
We’ve made it back close to the SPX 1200 breakdown today and “everyone” is playing the snap back from one of the most oversold conditions in history. “Everyone” is happy to play the bounce, yet fully aware of the overhead resistance. “Everyone” is happy that markets appear to be back in the “Central Planned Computer Controlled Marketplace” headed by Dr. Bernanke.
But the warning cannon has been shot. Markets did not exhibit volatility, they exhibited instability. And that is a very dangerous phenomenon for markets. My suggestion is to be extraordinarily quick on the trigger if you are “playing the bounce” and watch the volume carefully. If it should appear to be heavy on the downside again, get out of Dodge quickly.
In hindsight, the S&P downgrade was clearly leaked well before the announcement. But nobody will go to jail. They will instead just re-buy what was sold at higher prices before the instability resumes. The race to the bottom of economic numbers is well underway and the march to Jackson Hole continues apace. If there is no QE3, I expect the lows of last week to be tested. In the meantime we could keep up the upward pressure into the SPX mid-1200’s.
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I am a former Motorola employee and got some MMI shares when the company split. I sold it at about $23 a share. Only 600 shares but I feel like someone kicked me in the stomach today.
I’ve been mostly in the stock since it got to $3 a few years ago. I’ve been in and out ever since. It just so happens that I am out now.
But at least some of my subscribers own it!
This is one of the reasons I hardly ever sell “all” of any stock that’s performed well for me.
And yet, I still get caught out, every now and again. Happens a TONNE with the gold and silver miners. Often, the shittiest performers will turn into space rockets over night, getting bought out by AU or GG, or NEM.
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As one of your radio show followers who stayed in, many thanks Scott. Made my day!
Scott, kindly check out the short squeeze competition in the PG
Throw the pikers a bone. No pressure