I have already outlined the obvious stock sectors that are no-brainers for shorting largely because Covid-19 has put them either out of business for the immediate future or has severely hampered profit prospects for this year.
The most obvious are the cruise companies – NCLH, CCL, RCL – since it’s going to be a long time before they can pack a liner with either customers and crews. And now several of the key destinations have so enjoyed being tourist free there is talk they are not even going to allow the ships to dock and disgorge passengers like they were doing before the pandemic.
Next on the list movie theaters – AMC, CNK – since even if they open with social distancing they will at reduced audience capacity. Can they make profits on half a house or less?
It’s the same in the airline sector – AAL, UAL, DAL, LUV – less flights, less passengers, more trouble with the virus every hour of the day. Throw with BA too. No need to buy passenger planes when there are so few passengers and you have a fleet of excess airliners in storage.
I always have coal stocks – BTU, ARCH, SXC, CNX – on the short list because the coal sector always a short. It is not the fuel of the future and is becoming more and more not the fuel of the present.
Now I’m going to add banks as short prospects — JPM, GS, BAC, C, WFC – largely because they have lagged the rally from the March low for too long. That spells trouble not only for the sector but for the market as a whole. If the economy is going to tank and take the stock market with it (any day, week, or month now), it’ll probably, seriously, start the drop in the banks.
I’ve included DB on the chart panel below bacause it is a bank but it’s a somewhat separate case. Its price action is news driven since it has been the primary conduit for the money laundering between the Russian Oligarchs and the Trump Organization. Whether it is or is not going to have to pay for those illegal activities bats its stock price around more than banking fundamental alone.
The market sell off may have begun today with the NYMO putting in a high below a high on short-term breadth and the all important NYSI turning down (my key triggers) but with the FED meeting tomorrow, the timing is still a bit of a crap shoot.
(click on the chart panel for a larger view)