Beat on Earnings / Miss on Revenues – CLF will reverse itself

Cliffs Natural Resources will reverse itself.

I was short a small position going into earnings and have turned it into a large position at an average price of 99.65. It is trading at 102.5 pre market. I am shorting more. I am not concerned. This is another example of the market’s delusional behaviour. The stock is up 10% premarket. Here is the bottom line. They crushed it on earnings. They missed on revenues. This is the pattern we have seen this earnings season. Same as Dell. But I strongly believe that companies have stretched their margins to the maximum extent. It is the demand that they cannot create. Beware of buying stocks on earnings multiples in a rising interest rate environment. I have seen this kind of bubble build before in the 2 previous decades I have been a trader. These are the bubbles that lead to 10% corrections. This problem may take some time to grow, but I actually think we are already in it. It will be most apparent in the banks next quarter. I predict they will miss on Revenues and perhaps meet expectations on earnings. Analysts should start to see this trend start to develop over the upcoming month. Channel checks and manufacturers will show a pause in advance sales. As this leaks out the correction will begin.

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