It seems like every day moves in the other direction. One day the market falls, yet tech lags, and then tech rockets up, with the market falling - and who knows what other sectors are doing...
We do see to be at some type of rotation again, with all of the secondary issues being put onto the market. Overall, these make many of the companies actually more stable by de-leveraging their balance sheets. In many cases, it takes bankruptcy off the table which is good for individual stocks. However, now that the flock of issues are underway, and the stocks have risen, these new issues do indeed dilute future earnings and increase the supply of stock. All things being equal, this is bearish. In the very short term (next few weeks) this should keep a lid on the rally as supply gets mopped up. Not only that, I actually expect weakness from new issues at this point in the face of recent news were secondaries cause rallies. If that's the case, where does money rotate into? Clearly, we are not in the mid to late cycle stocks, and merely exiting a depression. If that's the case, I suspect we will get a reverse rotation out of early cycle names back into defensive names.
Here's PNRA - casual dining has been leading the market since Jan, and this is one of the leaders. Until recently, anyways.
LVS is another consumer spending name and was one of the latter to take leadership. It has yet to breakdown, but appears ready to do so, if this reverse rotation thesis plays out.
On the flip side, some defensive names have been holding up in the past week and are doing rather well.
KO is another. Just look at the slew of names from early cycle and defensive, and you'll get a pretty good picture.
We do see to be at some type of rotation again, with all of the secondary issues being put onto the market. Overall, these make many of the companies actually more stable by de-leveraging their balance sheets. In many cases, it takes bankruptcy off the table which is good for individual stocks. However, now that the flock of issues are underway, and the stocks have risen, these new issues do indeed dilute future earnings and increase the supply of stock. All things being equal, this is bearish. In the very short term (next few weeks) this should keep a lid on the rally as supply gets mopped up. Not only that, I actually expect weakness from new issues at this point in the face of recent news were secondaries cause rallies. If that's the case, where does money rotate into? Clearly, we are not in the mid to late cycle stocks, and merely exiting a depression. If that's the case, I suspect we will get a reverse rotation out of early cycle names back into defensive names.
Here's PNRA - casual dining has been leading the market since Jan, and this is one of the leaders. Until recently, anyways.
LVS is another consumer spending name and was one of the latter to take leadership. It has yet to breakdown, but appears ready to do so, if this reverse rotation thesis plays out.
On the flip side, some defensive names have been holding up in the past week and are doing rather well.
KO is another. Just look at the slew of names from early cycle and defensive, and you'll get a pretty good picture.
