Market Comment

Glamours Lose Shine

July 22, 2012

“When the facts change, I change my mind. What do you do, sir?”

–John Maynard Keynes

Last week’s takeaway was the dumping in certain of the speculative growth stock glamours. Otherwise, at the surface, shares had a productive week as they continued their climb out of the previous week’s selling. The below chart shows price falling short of the previous high at “A.” We would not read too much into this.

The important level is the July 12 low of 2837, signified by “B.” Should price take out this level on an intraday basis, the intermediate-term trend would shift from up to down.

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The greater number of defensive, low-expectation titles that comprise the S&P allowed it to print a new high last week, confirming its medium-term trend.

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However, even in the blue-chip averages there is a semblance of decay.

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Secondary indicators move in the wrong direction. The yield on 10s scraped a new closing low Friday of 1.46%. The euro hit a two-year low vs the buck.

The backdrop also worsens. Friday, Spanish 10s went from 7.01% to 7.27%, a new Euro-era record. As for Greece, its time is running out, and an exit from the euro seems inevitable.

Last week’s action in first-cabin growth stocks speaks. Chipotle Mexican Grill (CMG), Whole Foods Market (WFM), Intuitive Surgical (ISRG), Monster Beverage (MNST), Vivus (VVUS), Synacor (SYNC), and Sally Beauty Holdings (SBH), showed their true color, as is seen below.

Chipotle Mexican Grill (CMG) Gilmo Report Stock Chart

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In summation, despite the uptrends in the major averages, last week’s loud breakdowns in a number of leading growth stocks tells the whole story. The speculator who operates in the intermediate-term should be in a full cash position.

Kevin Marder

Gil Morales & Company, LLC (“GMC”), 8033 Sunset Boulevard, Suite 830, Los Angeles, California, 90046. GMC is a Registered Investment Adviser. This information is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to GMC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Gil Morales & Company, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2008-2018 Gil Morales & Company, LLC. All rights reserved.