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Stock Tiger Stalking Stocks™
For Monday August 6, 2007
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Dow -281.42 at 13181.91, Nasdaq
-64.73 at 2511.25, S&P
-39.14 at 1433.06
That company has an appropriate name in this bear
market and it added to the selling on Friday. Bear Stearns
Chief Financial Officer Sam Molinaro said the bond market may be in
a worse predicament than the 1987 stock market crash and the
bursting of the Internet bubble in 2000. He said, "..worst
fixed-income markets in more than 22 years."
Of course it is convenient to blame the market for the poor
management at Bear Stearns. They recently had two of their hedge
funds "almost blow up" that were highly leveraged in the sub prime
mortgage market. Seems to me if you give credit to people who have
low income and or a bad credit rating it is your fault and not that
of the market. Especially giving such credit during a housing
bubble.
We pointed out in our Friday morning video that the Dow had closed
just under the 50-day EMA so a good low risk place to short as if
the job's report was weak it would add to the downside and if strong
it may mean little. Regardless the stop would be tight. The short
paid off very well and if using the futures contract it paid about
80% on your money.
The jobs report came in at an addition of only 92,000 jobs, and the
unemployment rate rose to 4.6 percent, its highest level since the
start of the year. Average hourly
earnings rose $0.06 or 0.3% to $17.45, in line with the consensus
estimate.
So the market was weak on Friday but not drastically so until the
Bear Stearns comments. Jim Cramer wrote, "What we were hoping to
hear him say, and we sure didn't, was that Bear Stearns has traded
in all kinds of markets, and this one will be no different, and when
the time is right, it will buy back stock -- or that it had started
-- and that the idea of liquidity issues is so ridiculous as to not
even be worth mentioning. Nope. We got the opposite. I don't even
know, for the life of me, why they did this call."
Also adding to the sell off was Jim Cramer's
outlandish rant on CNBC
that Bernanke and Poole and the Fed is asleep and they are not aware
of how bad this situation is out there. He said the Fed should be
lowering the rate at the discount window. Well Jim, these things
happen in the world of hedge funds and a percentage point from the
fed will not fix it overnight as you suggest. The Fed only controls
the short term rates and anyway to encourage even more borrowing at
this time seems inappropriate.
The Fed will give an interest rate decision on Tuesday and it is
possible that this event may cause a rally but if so it will likely
be short lived. The markets are now quite bearish and rallies will
be thought of as bear market rallies to be shorted instead of
bought. In July the 70-year old law about having to have an uptick
in the price of a stock in order to short it was removed so shorts
can now just keep pounding on a stock as it drops. Hedge funds
supposedly now account for up to 50% of trading and they love the
market volatility and certainly love to short.
The stocktiger watch list had 27 stocks trigger this week
- half were shorts and half were longs. The longs were better for
day trades while the shorts keep adding gains. It was a good week
and encouraging that we did so well during this weak market. Bear
markets can have powerful rallies so we will keep both longs and
shorts on the watch list.
Here are how the major indexes did for the week.
Another week with no sector
making any significant gains.
This historical chart shows the norm is for the
market to pullback at least until mid October though it shows a
rally into September also - and we may see a relieve rally late this
week or next.
From Profit.net some of the top sectors over
the last 3 months.
Prophet.net sector performance
The Dow closed right at a trend line and has a second one a
bit lower that may be tested if there are margin calls on Monday. A
third trend line in gray is also at the 200-day EMA.
The Dow shorter term chart shows how
Thursday it ran right to the 50-day EMA so a perfect short sell
setup. Stochastics are now again below 20 so at higher risk on the
short side so keep tight stops if short.
Dow 15-min chart shows the last buy and
last sell using only stochastics as the signal. (buy on move over 20
and sell on moves under 80) The buy could also have been the August
first. Here the buy got you in at under 13200 and sell and short
over 13400 so well over a 400 point gain total or over $2,000 per
contract that tied up about $1,800 or double your money in two days.
In each case stops were close so risk was low. Now RSI is back under
30 and stochastics under 20 so higher risk to lf a short.
The Japanese Yen is being watched
as it is above its 200-day and near a possible horizontal break
above the 84.30 level. A higher Yen forces some yen buying as carry
trades get unwound and that generally is bad for the markets as
equities are sold to raise money to buy the Yen.
ProShatres Ultra Short Dow closed above
its break out line again. If medium term I would keep a stop under
the 50-day though it may case some whipsaws. Then we would watch any
relief rallies in the Dow to determine a re entry point. There could
be a market crash this autumn so if you have some longs in an IRA it
may be advisable to hold some of this long term as a hedge on your
longs on top of any you buy just for the upside potential.
The Dow Jones Transportation average broke the trading
channel support and the 200-day EMA.
The Nasdaq broke support and is now near the 200-day
and the 62% retrace.
The Nasdaq bullish percent index is
nearing is low from last year.
The S&P 500 broke below its trend line
and the 200-day but their is hope it may bounce at the 38% retrace
for the short term.
This weekly S&P 500 chart shows the
lower Bollinger band at 1416 so an area to watch for a rally. You
see there is support at the 1326 level and the general time frame
for it is the meeting of the trend line and the horizontal support.
We watch the stochastics and RSI for oversold readings that may come
in the next few months.
The semiconductor index was looking like it may bounce at support on
Friday until the last couple of hours but it did not hold though it seems
oversold short term.
The NYSE closed right at
the 62% retrace and a bit below the 200-day EMA.
The number of stocks in the NYSE now trading above their 50-day EMA
is at a level not seen in several years so a brief rally at least
may be coming.
The Russell 2000 broke the 50-week EMA on the
weekly chart as it has done 4 times in the last 4 years. This time
however it also broke the trend line. This should mean a real bear
market has begun for the Russell. We will watch the RSI for readings
under 30. The ProShares Ultra Short Russell 2000 trades as symbol
TWM. It goes up about
200% of the percentage that the Russell 2000 goes down so on Friday
it gained 7.5%.
We are not trading this fund as the new ETFs are better but a good
gauge of the small caps. It closed at the 65-week EMA which has been
resistance for 4 years so a break above would be bearish for the
markets but do note that the stochastics are almost over 80.
The Yield Curve in the negative territory but is near
support. This negativity again suggest that a recession is coming
and that would now make more sense than it did a year ago.
The CBOE Volatility Index, or VIX, which is known as Wall Street's fear
gauge, jumped 18.6 percent to end at 25.16. It was the seventh trading session
that the VIX rose above 20. This rises to indicate participants
are bidding up index options as they become more nervous.
Oil still very near its highs
Gold daily chart shows a possible break at
$688.40 as the US dollar was heading lower again. We expect a move
back up in the dollar and that gold will not now break out. We
reviewed 80 gold stock charts and see none that have really
compelling trends at the moment.
Longer term weekly gold chart shows it back at both trend
line's resistance.
US Dollar it is retesting the recent lows. Think it
will put in the bottom here - will soon know.
NNRF stochastics still over 50 and stock may have given a
reversal signal on its little 3 cent gain on Friday. Am extremely
bullish on the company and believe that this is a sector also that
is not effected by a weak economy as nuclear growth is not
determined by short term economic changes and nuclear contamination
clean up does not stop during economic slow downs and the EU sill
has to replace lead by 2010. The 50-day has some resistance at $4.02
and we add at this level.
PLTG still sits at support but we have seen greatly increased
volume. A report shows a large short position yet the stock is
holding well at the 50-day EMA. The company has started drilling in
Texas and will begin in Tennessee when the permitting is finished.
In both cases it will be a continual and systematic raise in
revenues as the drilling will continue for the next couple of years
adding several wells each month and in the next year that would
raise net revenues of at least $0.20. We like to see the increased
volume as more learn of the company.
CFPC Coffee Pacifica added 32% this week The company
conference call update demonstrated
the 3X growth being on target for this year and anther 3X for 2008. This meets
with our original projections. The company has already received 2 of the 10
containers of Ethiopian coffer into the USA and has Papua New Guinea (PNG)
containers on the sea right now and all is pre sold. The company's shareholder
meeting will be at the MGM Grand Hotel & Casino in Las Vegas, August 30,
2007, at 11:00 a.m. local time. The next resistance is at $1.11. We think this
one also is a good sector in a weak economy as the company sells all the coffee
it can get and will be adding two additional countries for supply.
CYRX - chart not shown as is is stagnant as we wait for the final
approval from the NASD for the move to the OTC. We know it has been a long
process but that is the nature of the 15-C-211 procedure. They filed on Friday that the
company is going to start to do its own investor relations so hopefully they
will have a lot to announce when the move finally happens. We think the stock
price increase will be rapid after such a long wait. It is typical that after a
long wait and just before a final approval that some sold out of boredom and
will miss the move back up.
PYR.V - such low volume. It is likely to pick up after the earnings
report as we expect at least 2-3 cents. That was not a full quarter of earnings
after their additional wells so the quarter after will be much higher. Seems
another to buy in quiet times as it is having now.
Economic calendar from briefing.com
Some additions for our watch list EDO over
$37.00
WBMD broke out and pulled back. Think it may be a play on a second try
over $51.26
MRO under $48.60
CNXT - on Friday it went through our short price so now a short under the
low of $1.21 or on a weak bounce to $1.25 or $1.30 area
AMED Over $39.37
POT over $86.75
HPQ was looking good until the last part of
the day on Friday - yet still a bo over $49.09
TBSI over $40.00
STLD under the
200-day at $39.59 and the low of $38.92
KO over $54.50
A harvester walks amid undulating waves of tea plants in the
mountainous Nara Prefecture in central Japan.
An irrigation canal reflects dawn-stained skies over Imperial
Valley, a fertile farming region just north of Baja California.
That's a full lid for today - will see you all
during the week.
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