The Money Map Advantage
Thursday, May 25, 2006
By Horacio Marquez
Email – #45
** Holding Steady on Energy Stocks and Brazilian Banks
The market has held key levels and is way oversold. Therefore, we should have a few weeks of a nice rebound, especially in the most battered stocks. The fear of inflation has suddenly disappeared, as the Personal Consumption Deflator confirmed this (came out unchanged). In addition, this morning’s first-quarter GDP came in much weaker than expected, and existing home sales show the inventory glut of unsold homes growing to six months of sales, and prices in vastly overpriced areas crashing, while the rest is getting the usual 3% annual growth. The Fed rate hikes are working well, as has been my position.
With a lot of speculation taken out of commodities and my original soft-landing scenario getting confirmed, the 10-year U.S. Treasury bond found stability and came off its yield peak of 5.19% down to 5.03% – the market is realizing that the Fed should pause on June 29, as I have been predicting.
What does this mean?
Last Saturday, I presented at the Sovereign Society’s conference in Panama, and people were very anxious to know whether the world was falling apart – or whether this represented a buying opportunity. Because of the huge volatility in the market, my presentation (as well as those of other speakers) had to be adjusted significantly. I worked through the night to 4 a.m. in my room, updating all the returns since inception and poring over fundamentals and charts.
As a result, I said that Tenaris (NYSE: TS) looked like it was due for a reversal, forming a bottom and showing a base from which it could go to new highs. Oil exploration is increasing (not decreasing) and there still is a global rush to get oil and gas reserves, which translates to increasing demand for Tenaris. In the commodity selloff, oil barely budged and could pull back just a bit more, short-term, before getting back up to the mid-$70s. T. Boone Pickens this morning predicted mid-$70s oil “pretty quickly.”
Tenaris, after a mad sell-off (head fake) the following Monday, came right back. Having taken out the weak hands and leveraged players, TS is trading up in an orderly fashion as we speak. With sound fundamentals, and with the oil index (OIX) starting a bull run off the strong support, we are not going to give up our energy stocks despite our profits in them, especially at these levels.
In similar fashion, our iShares MSCI Brazil Index ETF (EWZ), Unibanco (NYSE: UBB) and Banco Bradesco (NYSE: BBD), briefly touched our stop loss levels yesterday, intraday, only to see good volume coming in to buy later: There were almost 1 million shares bought at the close yesterday on EWZ, and volume picked up also in UBB and in BBD yesterday afternoon and this morning.
The three stocks are trading up strongly today and we are not getting out of them, either. With a Brazilian economy that is accelerating, dropping interest rates, and enjoying a huge trade surplus and foreign direct investment flows, these prices for Brazilian banks are a steal, and large fund managers should soon recognize it. This is a time for buying and not for selling.
Because this is not the first time we see our stops getting slightly breached only to see a rally follow, I am not going to publish stop loss prices anymore.
I am going to keep them internal – you will only know when one is triggered when you receive a special alert. In some stocks, we might have 5% trailing stops and in some others we might have a 25% stop below the original entry price. You are free to set your own stops tighter or wider than mine.
In this way, short-sellers will not know the distribution of our stops and whether we were out at the first 5%, or if we will take a 30% correction in a stock where we have significant profits, because we have a much higher medium term target for the stock. This should keep them guessing.
Lastly, the view that I had articulated in Panama about the severely oversold nature of the market was seconded by a top Lehman Brothers technical analyst yesterday toward the close. He stated that a rally should come soon, in a very detailed technical analysis titled “The bulls are likely to start their counter attack today now that the Russell has reached its 200 DMA and 50% Fibonacci retracement.” I would love to show you the strong analysis, but redistribution is prohibited; if you’re interested, I urge you to contact a Lehman Brothers representative to obtain one. It validates my Panama prediction, and I expect a strong June leading into the Fed’s month-end meeting.
Therefore, to take advantage of this buying opportunity we will soon add another compelling pick or two, once I finish updating their Money Maps.
Enjoy and profit,
Horacio Márquez
Stock & Symbol
Current Price
Comments
Telivisa (NYSE: TV)
$19.23
Buy
Unibanco (NYSE: UBB)
$65.98
Buy
Peabody Energy (NYSE: BTU)
$59.28
Buy
IShares Brazil Fund (Amex: EWZ)
$37.26
Buy
BHP Billiton (NYSE: BHP)
$43.07
Buy
Banco Bradesco (NYSE: BBD)
$32.19
Buy
Petrobras (NYSE: PBR)
$85.79
Buy
Mitsubishi UFJ Finan. (NYSE: MTU)
$13.40
Buy
iShares Japan Fund (AMEX: EWJ)
$14.08
Buy
Tenaris (NYSE: TS)
$36.62
Buy
MSCI Austria Fund (AMEX: EWO)
$30.68
Buy
Market Watch
NASDAQ
1528.95
0.00
SP 500
813.88
0.00
DJIA
7749.81
+89.84
As Of 6:12AM 3/26/2009
Attention Money Map Subscribers!
Money Map Report,
New China Trader
& Money Moves Alert
are now found at www.moneymappress.com
