Morning Market Thoughts

by DAN Good morning. Sixteen years ago today the World Trade Centers were hit in the worst attack on our soil in history. Each year, the anniversary of 9/11 prompts me to consider my blessings, which are many. My thoughts and prayers go out to those who lost family or friends in this tragedy.

The futures are up a bit this morning and we’re set for a slightly higher open, albeit still in the interminable trading range. Six million people are without power in Florida and the damage caused by Irma and Harvey to Florida and Houston is extensive. The resilience of the market is actually pretty amazing, and it would not be advisable to short it in anticipation that these natural disasters will bring it down. The charts tell you what you need to see. They reflect the perceptions and expectations of traders. The collective group of traders involved in the stock market make decisions every day. They don’t get together in a room or Skype call and decide how they’re going to trade…but they do, in the aggregate, vote on the direction of equities each day. And so far, it’s a close election.

It doesn’t pay to anticipate the outcome; but it does pay to be observant and patiently wait for opportunities. You don’t make opportunities; you identify them, and act on them.

A few stocks I am watching today:

Thor Industries ($THO) and Winnebago (WGO) are in similar patterns and close to breakout points. If past natural disasters are any indication, both of these companies will be getting a lot of business from the government as efforts are made on behalf of those who are now without a place to stay. This notion is not a surprise. And since both stocks are close to breaking out, it really doesn’t pay to anticipate the breakout. You’re not getting that much of a head start; and you also risk losing money if the stocks do NOT break out. Wait for it; don’t anticipate it.

Apple ($AAPL) is hosting a new product roll out event tomorrow morning at 10 am Pacific Time. The stock typically falls after a product roll out. Unless you are a long term holder of the stock, I’d suggest that the traders simply wait for a direction before acting. After all, the event is happening during market hours. There will be no gap. (My bet is on the bears…though I don’t have any chips on the table).

Equifax ($EFX) stock is stable this morning. I’ll be watching this stock every day. The upward momentum in this stock actually peaked during the third quarter of 2016. While it recently hit a new high, there was institutional distribution during Q416 that took the stock down to $110. Honestly, I don’t see how this company survives. You don’t screw 134 million people though incompetence (10 year old servers were protecting your data. 10 years old! And the CEO, Rick Smith? Oh, he took the reigns

The class action suit is estimated to be about $700 billion (I’m surprised it’s not more). The company’s market cap is $17 billion. That’s a pretty big delta to absorb, and I don’t anticipate too much evidence that politicians will try to save the company. Lobbyists for the credit companies, including Equifax, have been lobbying Congress to kill a rule CFPB protecting victims of data breaches by outlawing forced arbitration laws. So far, they haven’t been successful. That’s dead now. Nobody in Congress is going to risk ticking off every single person who has ever applied for a loan.

If EFX falls below $120, I think it is a very strong candidate for a short. If Arthur Andersen had been a publicly traded company, that would have been the short of a lifetime. Everybody remembers what happened to Enron. While there’s no evidence of fraud here, there is plenty of evidence of a pervasive cavalier attitude among the executives in the company. And that nonchalant attitude has created an identity theft crisis the likes of which no one has ever seen.

Symantec ($SYMC) owns LifeLock. I think SYMC will be the beneficiary of this event (aside from the law firm bringing the class action suit). That stock was up 3.4% on Friday, but closed near the low of the day. But I’ll be watching this for a breakout above $32.50.

OK, see you in the forum.

–DAN

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