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Stock Tiger Stalking Stocks™
For Monday November 12, 2007
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Close Friday
Dow -223.55 at 13042.74, Nasdaq
-68.06 at 2627.94, S&P
-21.07 at 1453.70
 Lately
a rocky road that is Wall Street. The Federal Reserve System
was created in 1913 and one of its primary functions is to
maintain the stability of America’s financial system.
If you were to grade them would it be closer to an A or
and F? Greenspan when he worked for the Fed made his
famous irrational exuberance statement in 1996 when the
Nasdaq was at about 1,250. This was a warning that prices may be
getting into a bubble but for 4 years the Fed did not increase
margin requirements or do other things to help cool the market
but instead they let it rip as of course the member banks as
for profit companies are not actually looking out for the
private investors. In the last few years we saw the housing
bubble shoot up in a similar fashion and again the Fed did
nothing to control the situation. They not only let but
encouraged people with low income to buy overpriced homes
on terms that were destined to cause foreclosures and bank
losses. With foreclosures now up 200% in many states and so many
banks posting their huge losses I wonder if this was the Fed's
intention to let some of the non member banks fail. I am not
smart enough to know but can see that they sure do repeat their
past mistakes.
The credit problem, that was certainly
avoidable with even common sense credit requirements is what is
causing so much of the market turmoil right now.
A
Congressional report suggests that over 2,000,000 homes financed
by subprime loans will go into foreclosure in the next 18 months.
If all factors
were know the market could price in the downside but no one
knows for sure how bad it is going to get in the next year or
two. Corporate earnings are still pretty good and there is a lot
of cash flow and actually a lot of corporate cash also but the
oil companies keep raising oil prices even though it for sure
does not cost 4 times as much to extract and ship a barrel of
oil today than it did in 2003. I guess we will see a decent
correction in oil also - but from which point. The big cap tech
stocks have been very hot lately but the Cisco CEO mentioned that
there has been some slow down in USA corporate spending in tech
and that soured the market for that sector at the moment.
We also have these phony figures about jobs
that are hard to figure in. The establishment survey found 166,000
new jobs and President Bush went on TV to say how great it was.
Of course more jobs than that are needed just to stay even as
there are at least 175,000 -200,000 new job seekers each month.
There is a secondary survey about jobs done where homes are
called and residents asked how many are in the family and how
many work and how many are looking for work. This survey showed
a loss of 211,000 jobs not a gain of 166,000 but of course they
do not like to talk of that one. Like the unemployment that they
like to say is under 5% yet the
actual government figure
shows it is actually over 7%. The point being that with so much
misinformation, deception and in some case simply unknown
details it becomes extremely hard to price the general market.
If we knew the total the banks would loose (they like to say
write off) and how low home prices would have to get etc - but
we don't so lets use the charts and throw in some seasonality to
some extent. By the way...
November 11 is veterans day and seems strange to me that the
markets do not close on Monday. Actually even more strange is
that they close on Thanksgiving day but then open for a half a day
on Friday. Are they so greedy that they cannot close the extra half
day and give folks a 4 day weekend. Anyway salute the veterans with
your hands or your heart.
So on Friday it looked like the late day rally
would bring the indexes - at least the Dow back into the green for
the day until the last 35 minutes when sell programs hit with force.
The last I saw a report for was late October when program trading
accounted for about 30% of all NYSE trades. We will only find out
later but I bet it has been even higher than that lately. It is a
good time to watch what happens on news. If we start to see that the
market does not go down on more "bad news" than we can figure a
bottom is forming. The Friday selling was probably encouraged by
more possible negative financial news on the weekend and there was
some talk of threats of terrorist attacks in the USA. The Yen had
gapped up on Friday so carry trade unwinding also was likely a
factor.
For the week the Dow dropped -4.1%,
the S&P 500 -3.7%, the
Nasdaq -6.5%, and the Russell
2000 -3.2%.
I think this week we will see a good at least two-day bounce
starting no later than Tuesday afternoon so keep you list of short
term market buys handily for the trade. It is options expiration
week and I am not sure what the MaxPain point is as they quit
publishing but it looks like for the QQQQ it is at about
$52-53 (it closed at $50) for the Russell 2000 at about 810 (closed
at 772) and for the S&P 500 at 1520 to 1525 (closed at 1453)
so we will see how close they can come. Thanksgiving is the
following week in the USA and it most often has a good tone by
Wednesday of that week.
The sectors performed this way for the week:
Note there is a new ProShares ETF - the ProShares'
UltraShort FTSE/Xinhua China 25 so it goes up
about 200% of what the Chinese index goes down. So pay attention to this when
the Chinese market corrects.
Of course I am sure many of you have been trading
the popular ProShares short ETFs
like the DXD for the Dow, QID for the Nasdaq 100 and
the TWM for the Russell 2000 to name a couple that are buys
when the market goes down.
We expect a decent bounce this week though from
which bottom is yet unknown but watch for it. (The week may end down
then set up again next week but we will see a rally this week) Set tight stops and if
you get stopped out and it makes new lows you can get back in as you
cannot always get it right the first time. If you can watch the
market than futures are the best way to play as they give you hugely
more gain for your buck. However if you cannot watch it than using
the ETFs is good and we prefer the ProShares Ultra series as they
move 200% of the index they track. On the long side popular ones
include: DDM for the Dow, SSO for the S&P 500, UWM
for the Russell 2000 and QLD for the Nasdaq 100. These trade
like stocks so are easy to get in and out of.
This is the Friday 5-minute
chart of the Dow. It was looking pretty good having made up its
losses for the day until 35 minutes before the close.
Dow The lower Bollinger band is at 13176 so it is now trading at 134
points below the bands. Stochastics is in oversold land but not quite yet for
RSI.
The longer term Dow shows the close at one support and one additional place
below at the 38% retrace line and horizontal support. If it does drop further
that for sure is a point to watch for a long entry if it holds.
The transportation average has been weak for the longest of the other indexes
and has support not far below.
The Nasdaq gapped down on Friday and closed right on top
of the the 50% retrace. This is a valid bottom but IMO it is better
in the long run if it tests the 200-day also and that has the 62%
retrace also and other support as seen on the left. Getting sloe to
oversold.
The Nasdaq bullish percent is till rather
neutral. I have heard of a lot of bearishness but this does not show
it. Just a little lower and it would be to a bounce point that has
worked a few other times.
The longer view of the Nasdaq
shows the long term top line of this channel and the 50-week EMA
just below. Maybe a final resting place before a year end rally.
The semiconductor index SOX closed at some support and the stochastics
are oversold but not yet a good looking set up.
Russell 2000 back at some
support also and if we get a bounce this week the 800-810 are the
targets mentioned earlier as the MaxPain.
This chart is the ration of the Russell 200 to the S&P 500 as Bob Carver showed
recently and has remained inside the triangle so is still bullish.
The NYSE looks like it needs to test the 200-day and 50% retrace.
The percentage of stocks in the NYSE trading above their 50-day averages is not
at any extremes so we will watch if there is another round of selling.
A long term S&P 500 for perspective
The VIX volatility is reaching peaks it hits near at least some short
term turning points.
The 30-year bond yield has dropped again showing how bond traders think long
term rates are not going up.
Here is the US Dollar performance during the
President Clinton years. The dollar was king - really worth
something and everyone wanted it. I was getting 34 Rubles for each
dollar and travel in Europe was cheap.
Here it is in the President Bush
years - from 120 to 75 - a drop of 35% in buying power - and they
keep printing more money that lowers it more. Now I get only 25
Rubles for a dollar and pay double in London.
It is however so far away from
the trend now that a reversal at least for a while cannot be too far
off. I have put up a video clip on the site of
Ben Bernanke questioned by Congressman Ron Paul
this week
that shows how inept Mr. Bernanke is in dealing
with the issue at hand, well at least in being able to answer.
Remember that the Fed is not the government it is the
Federal Reserve System -
mostly private banks who want to make profits.
The Japanese Yen gapped on Friday so will at some point this week
pullback as the Dow rallies.
Oil closed down $0.39 for the week and may be
at a top - at least some Fibonacci lines line up that way so far. It
was at $25 in April of 2003 and it sure does not cost 400% more now
to take it out of the ground and ship than it did in 2003 so this
rise is due to speculation, greed, manipulation and for a big
part - it is priced in US dollars. It costs $95 US per barrel
but only 45
British Pounds and only 64 Euro so for them the price has been
pretty steady as the Dollar drops.
Gold gained $25 for the
week but is overbought still. This week even with the gains in gold
there were many gold stocks that pulled back. It is not that I am a
gold bear but cautious as we know that these vertical rises can drop
quickly like in May of 2006.
The is the Commitments of Traders report that can bee seen each week
at
buythebottom.com. The
commercial traders who should know the most have been selling the
rally for a long time and are now quite short while the large
traders who tend to be wrong at turns are very long. I forgot to
mention above that for the US Dollar the commercials are now
covering their shorts and adding longs while the Large traders
are selling their longs.
The economic calendar from briefing.com
Longer term stocks:
NNRI Broke out this week from its
downtrend line on heavy volume and has pulled back to test it from
above. Stochastics had gone almost to 80 so a bit over bought and the
lower volume pullback is typical. In a press release they said that
we would see the 3rd quarter ATOLL results this month. It is obvious
that the 2nd quarter results were well received as the stock rallied
70% from its low 3 weeks ago. There are probably many who had
significant gains that they took for the real short term.
CFPC broke out above its down trend line from September on very
heavy volume. I think as the time of store openings in China and the shipments
from Jamaica get closer the stock will pick up more interest. Must be a lot of
penny flippers as even on Friday some sold as low as $0.54 while the smarter
money was buying at support. From its low 6 days ago it rallied 47% to its
Friday high. Of course it is hard to buy the bottom but adding on weakness for
ones like this can rally pay off.
PLTG The stock has again came close to its 200-day and trend line though
it seems nuts to me. The company has reported very good news lately. One thing
that many may not understand is that the deal they are are doing now may close
in
another couple of weeks but the revenues are building up on their account since October at 175
barrels a day. At $95 that is $15,750 a day or $472,500 per month which is to their
account on closing. Their next Quarterly report out later this month will show
earnings but the next one will reflect the ones coming in now.
Also about the Tennessee natural gas wells they continue drilling and two of the
first 4 wells are "plumbed" - do not know the correct wording but they have
pipes installed. They are now going through the burn off process that many of
you have seen if you have driven through natural gas country and seen flames
burring above a pipe in the air. I am no expert but basically after a well
is drilled there is often a type of gas on top of the well that is lighter and
it is not the good stuff - it is corrosive to the pipes and environmental rules
or other require that you burn this off before hooking up the well to the
distribution pipeline. This can take 30-60 days but as they continue to drill
new wells, once the distribution flow begins they will be adding to it on a
regular basis and that is one reason why the revenues will see a significant increase
over the next 6 months.
I also want to mention that they have started another limited partnership phase
of private oil wells in Texas. I am not making any offer to you as I cannot and
this is only for qualified investors. I do know it carries dry hole insurance and has
a possible 2-1 write off on your personal taxes for 2007. If interested contact
me and I can put you in touch with the right people. I believe that this round
only has 16 units available.
CNGJ Our Uranium play ran up on heavy volume last week and pulled back to test its
support. They did announce that they added Mr. Murray Gauthier to their advisory
board and he was Senior Geological Technician for Cameco Corporation, the
largest Uranium producer in the world. This will give strength to them to
decide on the locations on their properties for best production. We expect them to file the form
43-101 about the expected value under their property fairly soon. The chart
clearly shows the interest in this Uranium company and the support area is shown.
New additions to our
watch list.
RATE Short under $41.80
PNW Over $42.33
HCN Over trend at $44.50 or $44.74
horizontal
AKAM It may be a bounce but not set up
well to play that so a Short
under the trend line, 50-day EMA and horizontal support at about
$35.40
VPRT Long over $48.00 - $48.60
shadow - or Short under $44.00
HOS On break of bull flag with good
volume
HLX Short
under $42.00
SQNM Over about $10.10 - $10.18 - not
exact
GT Short
under $26.50
BBG Short under
$41.24 - it may be more likely to bounce here as not a bad chart but
for the gap down on high volume
ALJ Short
under $32.50
NT On break of bull flag with good
volume
Some clouds and sky for you.
Photo from
http://www.photospectives.com/
Photo from
http://www.janefultonalt.com/index.cfm
That's a full lid for today - will see you all
during the week.
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