I hesitate to write this, but it could be weeks before we see another hearty selloff. Perhaps many weeks.
Listen, there’s not a soul on this planet that enjoys a market plunge more than I do. However, the rapid descent of the market has a flip side to it, which is that the “healing” process required to put prices at appealing shorting levels again can be slow and grinding. After all, the bulls are scared witless during such a plunge, so they are going to be hesitant, cautious and very measured when they resume buying.
Never Again
This varies from sector to sector, of course, but what I’ve done below is take a sample of six stocks that I was short (prior to covering them late last week) to show just how far away they are from resistance (that is, a good shorting price). As happy as I was to be short these before, I wouldn’t dare short them at present price levels, because they are miles away from what I would consider a logical stop-loss point.
Of course, one other possibility is that these companies are in such trouble that they simple resume their plunge and don’t even bother trying to “re-capture” those higher prices. But I wanted to show you some extreme examples to illustrate that even a multi-week rise in equity prices does not necessarily indicate that the first two weeks in October were meaningless.
Packaging Corp of America (NYSE:PKG)
Potlatch Corporation (NASDAQ:PCH)
Masco Corporation (NYSE:MAS)
International Paper Company (NYSE:IP)
Huntsman Corporation (NYSE:HUN)
Eastman Chemical Company (NYSE:EMN)
