"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
I had to just shake my head this morning as I heard the Wall Street "spin-machine" begin pumping Wal-Mart (WMT) right at a tradable high. It is amazing how the system works isn't it?
In August 2007, I wrote a "Journal" piece entitled, "Wal-Mart: Sorry Merrill, you're wrong again!".
This was the day that a Merrill Lynch analyst issued a "sell" recommendation on Wal-Mart when the stock was trading at $43 and some change.
In a little over 7 months, WMT is up 27%, trading just shy of $55. With the stocks 7 month rise, the Relative Strength readings are now close to registering a "sell" signaling for traders.
Wal-Mart now has a RSI reading of;
RSI- 7 months: 68.33
RSI- 7 weeks: 76.07
RSI- 7 days: 61.24
The RSI or Relative Strength Index measures overbought and oversold levels. Basically, when a stocks RSI rises above 30 it is considered a buy, while a RSI reading above 70 is considered a sell.
You can follow Relative Strength on overbought and oversold stocks by visiting the RSI Stock Blog.
The argument for buying Wal-Mart on CNBC this morning was consumers were hurting, and they were going to Wal-Mart to get more bang for their buck. Correct me if I'm wrong, but I said this 7 months ago when the stock was at $43, and not today with the stock at $55.
As we view this chart (barchart.com), you'll see that Wal-Mart is trading at the upper-end of its trading range which dates back to 1998. If you want to wait until the stock reaches $60 before you take profits, that's up to you. If you bought the stock when I first mentioned it in August 2007, I certainly wouldn't wait around for $75 before pulling the trigger.
There is one thing you need to understand about Wall Street's stock opinions. When you hear the Merrill says buy this, or Morgan Stanley says sell that, it is often one person’s opinion. In the big scheme of things, the opinion of one or two people doesn’t amount to a hill of beans.
Please take the opinions of analysts with a grain of salt. Any Wall Street analyst that has to put this disclaimer on the bottom of every research report cannot be trusted;
(Name of Firm) does and seeks to do business with the companies covered in this research report. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
ENOUGH SAID ?
Today, the Bank of England cut interest rates which is providing to be a positive boost for the dollar. The BOE is beginning to feel that the economic weakess is the US is beginning to surface on their side of the pond.
The Wall Street Journal had an article that stated "Inflation Is Set to Reach Decade High".
Oh, no joke! Haven't we been screaming this from the mountain tops for more than a year?
In times such as these, we begin to focus our attention on economically sensitve sectors of the market. Recessions are normally short term events, but given the magnitude of the downturn, this downturn could last for several months.
Since the stock market likes to project 6 months ahead, we are focusing our attention on consumer cyclicals such as the retailers. What is different today versus the 1970's is consumers have been conditioned like Pavlov's Dogs.
Many will forego saving for retirement with mindset that "you only live once". Oddly, I have seen the office personnel of some of my clients leave their jobs, and withdraw their profit sharing plan money to buy a pair of $200 sunglasses, or a BMW with no regard for their futures 10-20 years down the road. I call this the "Paris Hilton Effect".
The bottom-line is I believe consumers will spend anything they have in their pockets. I have been around too long, and have watched too many fools do stupid things with their money. As a result, I am focused in on retail stocks that have great long term track records.
Pay close attention to retailers that cater to Women, Teens & adults under 30, and Electronics.
On the political front, the Bush Administration finally found a General that will agree with them on Iraq. After going through several Generals in Iraq that weren't yes men, they found General David Petraeus.
I live in a military town, and my step son was in the Army and stationed in Iraq. I know a "yes" man when I see one.
Ok, the Bush Administration finally found a 'yes" man, but they still can't find this man.
