Beware the Canary in the Coal Mine Warning for Stocks
By Markos Kaminis:
Over the last month or more we’ve seen major momentum stocks failing. The names include a who’s who of last year’s greatest winners, like Amazon.com (Nasdaq: AMZN), Facebook (Nasdaq: FB), Tesla (Nasdaq: TSLA), Google (Nasdaq: GOOG & Nasdaq: GOOGL) and Netflix (Nasdaq: NFLX). Each of these ideas share a few important traits. They are all high-beta, richly valued stocks, and therefore the most vulnerable to systemic risk. They will exaggerate upside moves and also downside drives caused by broad market moving events. So, therefore, I say beware investors, because these are your canaries in the coal mine. Thus far, capital has flowed from them into other stocks, and mostly into value names like for instance Apple (Nasdaq: AAPL), which has soared lately. However, I am concerned that eventually this sector shift will transform into a full blown flight to safety. When that happens, the entire market should sell off, and so I suggest investors sell the SPDR S&P 500 (NYSE: SPY) and the PowerShares QQQ (Nasdaq: QQQ) and buy issues like the SPDR Gold Shares (NYSE: GLD), Market Vectors Gold Miners (NYSE: GDX) and iShares Silver Trust (NYSE: SLV). Those interested in some simple protection overnight and on weekends could use issues like the Velocity Shares Daily 2X VIX ST ETN (NYSE: TVIX) and iPath S&P 500 VIX ST Futures ETN (NYSE: VXX). See my report Beware the Canary in the Coal Mine Warning to Investors.
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Over the last month or more we’ve seen major momentum stocks failing. The names include a who’s who of last year’s greatest winners, like Amazon.com (Nasdaq: AMZN), Facebook (Nasdaq: FB), Tesla (Nasdaq: TSLA), Google (Nasdaq: GOOG & Nasdaq: GOOGL) and Netflix (Nasdaq: NFLX). Each of these ideas share a few important traits. They are all high-beta, richly valued stocks, and therefore the most vulnerable to systemic risk. They will exaggerate upside moves and also downside drives caused by broad market moving events. So, therefore, I say beware investors, because these are your canaries in the coal mine. Thus far, capital has flowed from them into other stocks, and mostly into value names like for instance Apple (Nasdaq: AAPL), which has soared lately. However, I am concerned that eventually this sector shift will transform into a full blown flight to safety. When that happens, the entire market should sell off, and so I suggest investors sell the SPDR S&P 500 (NYSE: SPY) and the PowerShares QQQ (Nasdaq: QQQ) and buy issues like the SPDR Gold Shares (NYSE: GLD), Market Vectors Gold Miners (NYSE: GDX) and iShares Silver Trust (NYSE: SLV). Those interested in some simple protection overnight and on weekends could use issues like the Velocity Shares Daily 2X VIX ST ETN (NYSE: TVIX) and iPath S&P 500 VIX ST Futures ETN (NYSE: VXX). See my report Beware the Canary in the Coal Mine Warning to Investors.
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Labels: Market-Outlook, Market-Outlook-2014-Q2
posted by The Greek | 2:21 PM
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