"Prepare to Take It Down a Notch"
By James J. Cramer
RealMoney.com Columnist
8/30/2004 10:02 AM EDT
With three straight up weeks under our belt, it's difficult to believe we still will have as few bulls as we had last week -- 39% -- in Chartcraft's Investors Intelligence poll. That could be a huge negative if the number of bulls increases because we are as overbought as I can recall -- plus 6.4 on the Standard & Poor's oscillator I follow. That's worrisome, worrisome to the point where I think that if you are not making sales here, you truly are too bullish in your outlook.
We've had a remarkable run from where we were just a few weeks ago despite this red-tinged start to the session, one that seems invisible if you are in Intel or Microsoft or EMC but is simply terrific if you are on the Phelps Dodge or Lowe's or Home Depot horses, and is downright fantastic if you are in the financials. The rallies in stocks like J.P. Morgan and Commerce Bancorp or Ameritrade and E*Trade have been spectacular vs. the doldrums they were in.
eBay, Electronic Arts, Qualcomm and Research In Motion have been flying. Amgen, Biogen Idec and Gilead have had remarkable moves. Procter & Gamble and Kimberly-Clark, two favorites, have gained nicely throughout these last three weeks. To me, every one of these stocks is ripe for profit-taking.
I don't foresee a giant pullback. Only a major terrorist action could give us that, given the paltry returns from the competition, notably the pathetic yields of the bond market.
But I think that the rally we have had doesn't make a lot of sense, away from lower interest rates and the decline in oil from $50 to $43. I suspect that earnings for most of these companies probably will be in line, but no better. I believe that oil isn't going down much further and neither are interest rates, so it is tough to see a catalyst that will take stocks higher.
Lots of reasons, though, to take things lower. "
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