Catch a falling knife? Let’s look at Michael Kors (KORS). (May 27, 2015)

Free Chart

KORS COH KORS SMH KORS 


Michael Kors ( NYSE:KORS ), don’t buy, don’t buy, don’t buy. They reported numbers, their biggest deal was, I think they basically guided lower in their same store sales. Now, happily I’m not long this stock and I’ll tell you exactly why. This bad boy rolled over right here. This was a long time ago that this thing rolled over and I remember, I think I was even talking about it on CNBC if I’m not mistaken. I was comparing this to Coach ( NYSE:COH ), which got killed here.

What happened with Coach ( NYSE:COH ) was that they expanded too quickly. Actually it wasn’t too quickly it was just they expanded to darn much. The idea is with all these luxury goods, the handbags and the wallets and this and that. Look, it’s all about cachet, everybody wants to own the right thing. If you didn’t care about that ladies just get one of those shopping bags and put all you things in there.

But you’re not going to do that, you care more, and I get this, not on purses, but you care about the label, Louis Vuitton, etcetera, etcetera. Hey, me too, I’m just a Tommy Bahama guy. But they essentially lost their cachet by expanding too much. They made their stuff too easy to get. Suddenly it’s like nobody really wants it that much; if they get it for a gift that’s fine, but not that big a deal.

Kors ( NYSE:KORS ) had the same issue here. They expanded; they were opening up all these stores, and then what’s happening now? Same store sales drop, so does the stock, like massive. Don’t go near this stock right now, and here’s why: because you will be buying from institutions. This thing traded 70 million shares today. That is a lot of shares. Look at the 50-day moving average prior to today, the 50-day moving average was less then 3 million shares, so suddenly, Boom! So this is massive liquidation.

Now, you could see an oversold bounce tomorrow. The stock’s down 25 percent and if you do it’s likely just short covering. I don’t think this is a buying opportunity. I heard Karen Finerman, who’s quite humble, on “Fast Money” earlier tonight, she just said, “Yes I’m up to the teeth in this thing, I don’t like the stock, but it’s now super cheap and this and that.” But, she was saying this is a problem, she didn’t like this at all. She wasn’t even talking about this being a buying opportunity and she likes cheap stocks.

The bottom line is this, this stock will ultimately bounce but you don’t want a part of this. If you’re still long the stock or if you bought today I can’t help you, I don’t know what to tell you. The stock could go up, the stock could go down. I’ll just tell you this, ultimately this is not going down and if you’re the type to catch a falling knife, Hey! here’s you stock, because the knife is falling. Frankly what I would suggest, seriously, is just steer clear of it. I know you can be like a moth to a flame because it’s down so much and you want to get it at the low just for bragging rights.

I would just suggest this: if that’s your game, literally wait for the stock to come back to above 50.00, 50.50 or so, $50.50 and then start filling the gap. My bet is it ain’t going to happen. Not until a whole lot more trading has taken place. So be buying this kind of dip, buy this, ( NYSEARCA:SMH ) you’re going to make more money than sitting here buying Michael Kors ( NYSE:KORS ). And if you really can’t help it, hey, go buy a handbag.

Airlines — touch and go or free fall? I’d say the latter. Let’s look at the Dow Jones Transportation Average (DJT) and Delta Airlines (DAL) (May 26, 2015)

Free Chart

DJ-20 DAL USO XOIL.X DAL 


Look, this is kind of a blood bath; I’ve been talking about this divergence for a while. I posted a note on this over at as well. We’ve got this death cross, the 50-day moving average crossing over the 200-day moving average. I’ve been actually kind of yipping about this, I think in the “Free Chart” too for a while, about how this is really kind of a function of math that this is going to come.

I didn’t have CNBC on today so I don’t know if anybody was talking about it, but I’m talking about it now. This is not good for the market, I want show you Delta Airlines ( NYSE:DAL ). This is one of the better stocks in a really garbage sector right now, which is the airlines stocks. This is finally breaking down below the 200-day moving average; look at the big spikes here in volume, red, red, and you can say, “Oh but Dan.” Yes it’s high volume, but not as high as this one, this was 35,36 million shares; this not even 19 million.

If that’s your rationale for holding the stock, I’m just telling you between you and me, just between us kids, you’re dreaming. These stocks are going down. Oil ( NYSEARCA:USO ), still going down, you can look at it however you want ( XOIL.X ), oil looks like it’s peaked for the short-term yet what’s happening with the airline stocks? They’re still going down.

My point is, it is not an area that you want to be in. This wouldn’t be the one that I would short ( Delta Airlines ( NYSE:DAL )) but you can short some of these names if you choose. I think that’s actually a good bet, like JetBlue ( NASDAQ:JBLU ), even Southwest ( NYSE:LUV ), some of the others. I just want you to stay away from this. At the very least look at it this way, everybody that bought here, they’re all losing money right now.

So if this sector and in particular this stock starts to rally back, there’s going to be a lot of folks that want their money back and they’re going to be saying like Mortimer and Randolph, “Sell, sell, sell, get those brokers back in here.” Don’t be long this sector, don’t be long this stock.