The Day of Judgment (CP)

There’s no excuse for a lack of courage.

Most everything else can be forgiven.

Not that.

We bring this to you because we believe that in the years ahead, all of us – and we in the West, in particular – are going to be tried and tested in ways we never imagined. The upbringing we had and the experiences we cherish will be vastly different from those our children endure, and we’ve little doubt that our grandchildren’s lot will be of a substantially different order altogether.

What will bring about that change is the very financial system about which we write every week, a system that’s been in place with tweaks and modifications ever since the British perfected the mercantilist model some 400 years ago and used it to conquer the world.

ladies

The truth, however, is that after several centuries of continued stretching and contorting, excising and emending, the capitalist regime in which we now toil has grown old and tired and is no longer robust enough, we believe, to contain the very guts within it.

It’s with a tone of lament that we say it’s a system now on life support.

Breaking News: World Bursts Appendix!

And when it becomes clear to more than just a few of us dimwits out there that the cards are collapsing, we expect a wholesale breakdown to ensue and the civil order to be replaced by something… well, less orderly.

And when that happens, it will take more than just a Ph.D in philosophy to navigate the moral and ethical dilemmas we’ll be forced to face.

In fact, you can study all the world’s ethical systems from Socrates to Scientology, and become a master of propriety and a knight of the all-knowing ‘right thing to do’, but that knowledge won’t be worth a damn if you can’t put it into action – if you don’t have the moral courage to actually get up and put it into practice.

Because ‘moral clarity’ is only a small part of what you need to get it right in life. The rest depends on heart. And that, in the end, is what determines your worth.

How many, after all, can truly say, ‘I knew what I had to do, AND I did it.

Not many.

Far too many will stumble over what their neighbor thinks, or how their boss will respond, or how their family might react, or what the news media or police or the Dalai Lama might say. And so that’s where it will end.

With inaction.

And cowardice.

watching

Because too many folk are more interested in being liked than with being honest. Too many think it’s better to watch – and let someone else do what needs doing – than to stick out their own necks and face down their neighbors.

And precisely because of this, too many will turn away from right action at the moment of truth, because the fear of what might follow is too terrifying for them to contemplate.

Fear.

But you’re allowed to be afraid, friends. And who isn’t? That’s what makes it ‘courageous’, after all.

But you will never – ever – forgive yourself for looking the other way when your moment on earth to make a difference arrived… and you balked.

digging

Be good to your neighbors, friends. Your children may one day depend on it.

The Courage to Short a Rising Market

Despite the inevitability of higher prices for equities, there comes a time for every stock to overshoot on the high side and subsequently roll over.

And that’s certainly been the case with Canadian transport giant CP Rail (NYSE:CP), whose shares have risen by over 300% in the last thirty months and are now showing signs of wear.

Have a look at the long-term chart –

cp

• Just this month, shares of CP broke above a their three year price channel, indicating an overbought condition might be at hand (in blue).
• Along with that, RSI and MACD indicators have been diverging lower against price for well over a year (in black), a sign that the move is gradually, but unquestionably losing momentum.
• Coupled with those two items, we have price trending at an obscene altitude of 150% above the long term weekly moving average (in yellow), a phenomenon that all but begs for a correction.

Now have a look at the daily –

cp2

• The daily chart shows price flying at a still ridiculous level of 40% above the long term MA,
• A bearish ‘shooting star’ pattern indicates a potential top (red circle),
• And all of this after RSI posted an extended stay in the overbought 80+ range just two weeks ago (in blue).

In short, this guy’s a goner.

Sell near term bear CALL spreads on it, or buy longer dated speculative PUTs, or use the former to fund the latter.

But get it done.

Many happy returns,

Matt McAbby, Senior Analyst, Normandy Research

See what people are saying...

  1. Dan O'Connor

    I agree with Matt and I’m going to act on the situation.

  2. Pierre

    Never, never go against the trend!!!
    Picking a top or a bottom is for amateurs and/or fools.

  3. Melvi Young

    I think all of the railroads have a lot of pricing power & growth potential . Just look at the chart of UNP,NSC & others.

  4. Gary Haas

    That is an interesting observation. I’m inclined to disagree with you on CP just based on the earnings report. Right now there is no reason for all of the stocks to continue into the ozone, but some unknown reason, an alien force continues to buy and drive the Dow to new highs. Most people I know are out of work, yet the jobless report says it just ain’t so. I think if CP with its excellent earnings, goes down, which it may, it is because the market is as wierd and the rest of the world. For years I sat on the sidelines waiting for what I thought was an overvalued market to get cheaper. Never made a penny sitting on the sidelines. Now earning reports are great, most everybody I know is out of a job, including me, and common sense was thrown out the window years ago, but I’m at least making money today in CP.

  5. Murray Eisenberg

    This looked like an excellent idea but then that excellent quarterly report came out showing a nearly reasonable projected yearly eps of 22, and the rsi and macd have changed course. Is it time to throw in the towel on this one yet?

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