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Afternoon Note

Price Discovery More Than Panic

By Charles Payne, CEO & Principal Analyst
5/13/2019 2:01 PM
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The market was hoping to hear something positive over the weekend on trade, maybe a phone call between the two leaders.  There was nothing.  Then, this morning the stakes were ratcheted higher with China hiking tariffs on $60 billion variety of products from 5 to 25%.

Tech is being hit the hardest, along with Communication Services, which includes lots of momentum names many consider to be Technology.  There are other pressures to some of these names, including Apple (AAPL) losing in the Supreme Court, and India joining the EU in reviewing potential Google (GOOG/GOOGL) anti-trust issues.

I know these big hits to the market are very unnerving, but I have always welcomed them after learning from my first one on Black Monday in 1987.  They take the market to levels they are destined to reach but only quicker.

S&P 500 Index

 

-2.51%

Communication Services (XLC)

 

-2.89%

Consumer Discretionary (XLY)

 

-3.08%

Consumer Staples (XLP)

 

-1.03%

Energy (XLE)

 

-1.92%

Financials (XLF)

 

-3.02%

Health Care (XLV)

 

-2.00%

Industrials (XLI)

 

-3.25%

Materials (XLB)

 

-2.61%

Real Estate (XLRE)

 

-0.36%

Technology (XLK)

 

-3.60%

Utilities (XLU)

+0.71%

 
 
Buying the Dip?

In many ways, today’s action is more price discovery than panic.  Of course, profit-taking coupled with defensive moves is causing the most damage.  I’m getting lots of calls and emails about buying this dip.  This is what you need to know.

Because of the nature of this pullback, China Trade War, we must make adjustments and add in other factors.

We have a long list of potential buys we’re refining each day.  While we aim to buy low, we aren’t trying to pick the exact bottom per se.  I’m excited about the valuations being created.  Meanwhile, the more the market builds in new tariffs as a longer-term reality, the bigger the bounce will be once there is resolution.


Comments
With Boeing, the problem is compounded because of the unknown liability damage from the on going safety issue. Deciding when the right price is right is not easy. 23% off the recent high makes one wonder if we are not already there. My gut tells me neither one will be a long term serious issue.

Robert Clanton on 5/13/2019 3:08:44 PM
There is no doubt Boeing blew it on several fronts that all erode confidence. I suspect consumers will balk initially but once given the green light to return to service more than likely fear will not supercede necessity. In that respect the stock is way oversold. The other wildcard factor is China but the same logic applies as China has an insatiable appetite for airplanes, CP

Charles Payne on 5/13/2019 3:12:18 PM
 

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