I was on CNBC Friday after the bell with Ralph Acamapora of Altaira, Alan Gayle of Ridgeworth Capital and Josh Lipton of CNBC. Kelly and Bill were the anchors.
It was a fun segment and we covered a lot of ground, here’s a summary of what happened.
Alan kicked things off looking at the fundamentals. He remains bullish and likes what he is seeing out of Europe. Lately, he has been adding to the International space.
Ralph was up next. I’m a huge Ralph fan, I think all technicians are. He has been very bullish this year, but lately sees some cracks. One big concern of his is 60% of the components in the Dow are broken or vulnerable. The last time he saw that was August 1998, right before the Russian bond problems and Long-Term Capital Management blew up.
I was up next and I’m a more optimistic than Ralph. I agree the Dow has been lagging (above), but the action in small caps and tech is very impressive. The Russell 2000 (RUT) broke about above the critical 1,000 area in July and recently tested that level, before bouncing this week. Also the Nasdaq is just a percent away from another new high.
Sentiment though is the one big positive here. After less than a five-percent drop, fear has spiked significantly. We’ve seen huge VIX call buying over the past month, translating to open interest seeing a big corresponding surge. Everyone is hedged against volatility now.
Not to be outdone, more than 35% of those polled in the Investors Intelligence poll are expecting a correction. This has only happened 28 times since 1980 and the near-term results are rather bullish. In the end, all the excessive fear we’re seeing on modest pullbacks is very positive longer-term.
Alan is encouraged by the recent improvement in the cyclicals, tech, and financials – all setting itself up for a good finish to the year.
Josh then noted that this week has a lot of economic data coming out and various Fed members are due to speak. This could provide some volatility.
Ralph finished things up reinforcing not to discount the weakness in the Dow. ’Never Fight Papa Dow’ is how he put it. In fact, now he is looking for a Dow correction clear down to 12,000.
You can watch the whole thing here.