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Stock Watch - CFC

(June 29, 2004)

Please read our terms and conditions before reading the following information.  Be sure to utilize a hard stop in each trade that you make!

Please note that any trader who bought into ALDN and CADA should have their long positions stopped out by now.  The market for momentum stocks currently does not look good – we will reevaluate once the Fed meeting is over and done with tomorrow afternoon.

A “diversified” mortgage services company, Countrywide Financial defied all logic and expectations during its more recent run into the stratosphere – even as other mortgage companies and homebuilders took a dive from their all-time highs.  The stock has also been consistently in the IBD Top 100 ranking of momentum stocks for the longest time – suggesting that most of its recent run to its all-time high has been about momentum more than anything else.  The stock gapped down today after Washington Mutual released an earnings warning earlier this morning – suggesting that the recent slump in mortgage lending is finally taking its toll.  Please note the continued decline of the stock after the last downside gap in early April (see daily chart below).  Momentum investors better take heed.  The author’s guess is that we are finally seeing a letting out of the housing bubble in various parts of the country – a full four years after the top of the DJIA and the NASDAQ (thanks to Greenspan).  New home buyers should also take heed.

Huge gap down of Country Financial Corp.

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