As Monday mornings go, this is, well, Monday. Unless it is a holiday, Mondays usually are somewhat of a downer. The first day of the work week also means the weekend is over. Even though I have the best job in the world, meaning I can arrange my time pretty much the way I want to, I still love the weekend. Anyway …
- On this day in 2009, the S&P 500 hit its nadir, closing at 676.53. That low marked a climax of a 16-month selloff that took more than half the S&P 500’s value.
The S&P 500 has risen some 177% since that day and since the “event” in Ukraine, it has risen still, but I suspect with Russia tightening its grip on the Ukraine, the latest economic news out of China (exports dropped 18%), the still tepid US economic data, and mediocre economic news out of Europe, the market will be considering a slight rebalancing in the near future. That’s fine; it needs it.
- The S&P 500’s forward price-to-earnings ratio, at 15.8, is its highest since the fourth quarter of 2008.
- Margin debt accounts totaled a record $487.6 billion in January, data from the Financial Industry Regulatory Authority showed. It shows hedge funds and other investors are taking on more risk and using borrowed money to enhance their returns. Borrowing on margin at this level is seen as a sign of overly bullish sentiment.
- The S&P 500 hasn’t seen a 10 percent decline for nearly two-and-a-half years, with the last one coming between June and October of 2011
The first two items above concern me less than the third item, but all together, the market has a way of looking at this stuff in context and deciding to take a turn for the worse. I see no reason for a large correction, unless the Ukraine situation blows up, but I do see and want a slight correction soon.
I also see a correction coming in the torrid-hot fuel-cell stocks, particularly PLUG, which has been in the financial news quite a bit recently. Maybe that is the reason it has jumped over 100% in the last few sessions. Then again, maybe it is experiencing short squeeze, since it is a highly shorted stock. As of the middle of last month, traders had shorted 38% of the float.
Average daily volume has increased 40 million to 68 million, which is crazy for a stock that is $8-plus above its 200-day moving average of $1.82 and $6-plus above its 50-day moving average of $3.95. Oh, and did I mention the company is not making any money, it has a negative cash flow, and its year-over-year growth is negative?
Now, I am high on fuel-cell stocks as you know, and I like PLUG in particular, but I think PLUG at this level is dangerous for those who are buying in now. It will have to come back quite a bit for me to be a buyer again. Sure, I am bummed I missed out on the 100% turn the last week, but as I wrote last week, I have a strategy and I will stick to it. It has gotten me this far successfully, and I see no reason to change now because one of my plays is streaking through the ionosphere on fumes and I am sitting on earth watching its trail in the sky.
- Four central European countries have asked the U.S. Congress to make it easier for them to import natural gas from the United States and reduce their dependence on supplies from Russia, the Czech Foreign Ministry said on Saturday.
The geo-political dance with Russia continues and with Putin in charge over there, this could go on for a while. Now, I don’t know him. I only know what I have read, but even though the information I read indicates he clearly is an egoist, he clearly is macho, and he clearly likes his power, he also strikes me as smart, so I think he will take this as far as he can.
If the US Congress does start making noises about loosening the red tape on natural gas exports to Europe, however, I think he will see Crimea as a loss leader. He still has the average folks in Russia to contend with and those folks are right on the cusp of unhappiness. As I said, he likes his power and he wants to keep it.
Keep an eye on PLUG, as well as the other stocks being dragged up with it (BLDP and FCEL to name two). What goes up fast will come down at a constant speed. Be patient and wait for the stocks to come back to earth.
Trade in the day; Invest in your life …
