Some Notes on the markets and MOS and POT

There wasn't enough time tonight to properly compile the onion post (for laughs and kicks though google The Onion... one of the funniest papers out there... now online as well...) so instead of nothing I will just enter a few quick but meaningful points...

• MOS and POT: MOS quadrupled earnings, showing strength across lines and mentioned that as an integrated producer of DAP they continue to have an advantage. They also confirmed that potash demand destruction is nowhere in sight and that competition is minimal as it takes years to build proper potash mining facilities and the supply just simply isn't there to meet demand. Period. The cost increases from inputs such as natty gas and from higher worker compensation demands in Canada is expected to me more than compensated for by increases in fertilizer prices for the foreseeable future. There are other points on the call but overall the story here is clear: in my opinion the strongest bull market in the market
• Sector rotation: There are many factors that may be keeping down the stocks of companies that are tripling or quadrupling earnings with prospects increasing for the future and trading at forward PEs of 10... (wait... did I just say that... yup it's actually true... )... of these factors I continue to scratch my head and we just can't ignore the oil lead sector rotation out of commodities. Human brains like simplicity... what is more simple than grouping all commodities together? Take a look at some of the other commodity stocks and futures like CHK (looking good for a technical bounce), UNG, etc... the demand for oil has been low for a while but it is no coincidence that the drop in price began after the historical peaks of the Memorial Day and ultimately July 4th driving season times in the US. The managers may have decided to make their money on commodities until oil's traditional decline... and then the rotation out of commodities would occur... almost all commodities. Notice how there wasn't a single "great quarter guys" on the MOS or POT conference calls despite both companies blowing out already ridiculous estimates? Sector rotation is a very common reason stocks go up and fall in the short to medium term... and it is no surprise either that when charts like those of many commodities start to turn sideways the bears smell blood... it's worked for oil, natty gas, and coal... at least for a while... and it was all set up for the potash stocks as well except that those inconvenient earnings blow-outs just haven't obliged at all... it didn't matter for companies like XTO but I reiterate that the potash numbers and prospects are in their own ballpark altogether. US steel (X) shot up, others may follow... the game with sector rotation is that no one wants to be left holding the bag when the money moves but at the same time if earnings are too spectacular there exists the fear that the smart money is just doing a head-fake and is buying up some of the best earnings stories in the market for cheap while others play musical chairs..... I can't tell you what is going to happen with MOS and POT near-term which is why I am going both short and long and hence attempting to building positions with minimal risk... longer term, stocks follow fundamentals...
  
• Overall market action... the Olympics are coming and a lot of the Asian stocks will blow out earnings estimates most likely. FXI has done well since it bottomed (see a Fix in FXI under recent posts... also take a look at GIGM... nice chart set up may be forming there. ) and QLD has turned sideways. ( Remember, tech stocks tend to do well starting in the second part of the year... as long as the market does not implode.) I mentioned earlier in summer (around Memorial Day) that the Summer might suck for stocks but that the Fall, when considering the Presidential election and the fact that certain stocks especially tend to do better in the Fall then the Summer, may be a nice set-up in certain areas. I'm thinking some moves in Asian stocks going into the Olympics and earnings, some tech in the fall... and then there is the most exciting area... the Green stocks... global warming is a big deal... some of the solars and other greenies have just been crushed... I guess I'm starting to look for the next sectors that might get money flow... the financial stocks also, despite their fundamentals, if they stay above the middle Bollinger Band we may see some moves there. All of these moves require confirmation... take a look at the charts... they are very telling. I'd love to include graphs and be more thorough but this is what I can offer for tonight...
  

Best, do your DD, etc, as always...
J

"The Yellow Rose Street Beat" is for informational purposes only. It does not give investment advice.