Stock Tiger Stalking Stocks™ For Monday February 23, 2009 You may subscribe to this newsletter free - subscribe Past 5 days Dow Nasdaq Close Friday Dow -100.28 at 7365.67, Nasdaq -1.59 at 1441.23, S&P -8.89 at 770.05 Economic puzzle  Seems like there are just too many hands playing with the economic puzzle and even if there was a solution, all those fingers get in the way. President Obama signed the $787 billion economic stimulus bill into law. Much of it is not at all stimulating and we have found no one who is in favor of it. On the tax credit side a working person may take home more money for about half a year if paid weekly. In that case the net pay received could go up as much as  $15 per week for 26 weeks. Some say this may start showing up by May or June. On Thursday Rick Santelli of CNBC made some comments about this bail-out/stimulus - now called a Rant and it is very popular on youtube and we put it on the blog as one idea he suggested was to just let the taxpayers decide on if they want to spend their money this way. The government's full energy seems to be on trying to get people to spend, spend, spend when in fact as the population has already spent too much so it is a time to save - not spend even more. Increased savings brings some short term negatives as companies do not sell as many things but long term it builds real cash that in the future can build a stronger and hopefully more stable economy if they ever get rid if the Fed. Butch Cooley gives us some thoughtful comments on the economy + a bit later. The stock market on Friday was down more than 3% before rallying late in the afternoon and this may be the "test" of the November lows that all have been waiting for to start a short term rally that could last a couple of weeks.  Tests are usually higher or lower than the previous lows and on Friday the Dow was lower while other indices were not and the Nasdaq closed in the green not even having hit the January lows so this is a positive divergence. At the same time however, the Transports made new lows along with the Dow so Dow theory would again confirm a strong bear. The European bank fears are increasing as more and more start talking of the horrible situation they are in. It may be bigger than the USA problem. Many Western European banks lent massively to Eastern European banks and did so using borrowed funds. This problem in the USA is "taken care of" by printing more money but not all counties can do this. Besides, the amount owed may be more than a county itself can pay so there are some extremely serious financial problems to come. This does not  mean that we cannot get a decent bear market rally but just that is not to taken as be a long term direction change. I read some article and realized that there are still people who own long sided IRAs. With so many ways to short one would hope that at a very minimum they are fully hedged. A time to go long again will be when the S&P 500 and Dow get back to their historic low PEs that takes place near major market turns and we are not anywhere near that. At the moment the Dow PE is still about 18 and it may go to single digits while the Dividend yield is under 4% and at lows it often goes to 5-6%.There will always be some stocks that go up as long as they are growing and making more  and more profits- we have some featured stocks we think will do so - but none will go up as much as they do in a bull market. One way to hedge or actually hold for long term appreciation is by shorting the EURO as it seems that it will eventually return the parity with the US dollar. The ETF  long (which you can short is the FXE and a 2X Ultra short ETF EUO.  There was a strong high volume move up for the EURO on Friday so it could rally for some time, maybe months, so one needs to watch the technicals but after it tops out this time, may be a good place to short it. Right now it may become a long for a short term as the US dollar pulls back. Producer prices rose 0.9% in January following a 1.9% decline in December, while the core producer price index increased 0.4%. Food prices fell 0.4% compared to a 1.4% decline in the previous month. Energy prices rose 3.7% following a 9.1% decline in the previous month. On a year-over-year basis, the producer price index fell an unadjusted 1%.   Jobless claims were at 627,000, unchanged from the previous week’s revised average. The less volatile four-week moving average rose to 619,000 from the previous week's revised average of 608,500. Manufacturing in the Philadelphia region shrank in February at the fastest pace in more than 18 years as employment and sales plunged to record lows. Business activity index tumbled to minus 41.3 from negative 24.3 in January.   This week the Dow made a new bear market low. The Dow put in its record high of 14,164.53 back on October 9, 2007. Friday the Dow closed at 7365.67 – down over 47% from its peak made 500 calendar days ago. For some perspective on the magnitude of the current bear market, this chart compares the current, 499 calendar day old Dow correction to that of all other Dow corrections, 499 calendar days after their respective peak (and that were still ongoing). Today's chart illustrates that, at this stage, the current correction has been by far the most severe correction in the post-World War II era and the second most severe correction since 1900. The only correction that was down more at this stage was the correction that began in 1929. This week's major indices: This week's losing and leading sectors:   This week's top and bottom industries:   Multi index  The Russell, the Dow and the S&P 500 all have their candles under the bottom Bollinger bands so a rally is soon to come. Mike Burk tells us, "The R2K was down 7 consecutive days going into the early October low.  From there it rallied 14.4% in 2 days.  In late October it fell for 5 consecutive days to a new low and then rallied 20.1% in the next 5 days.  It declined another 5 consecutive days to a new low in late November before rallying 22.8% in the following 5 days. Since the early October low there have not been more than 5 consecutive days in either direction." This may start to change this week. Also he pointed out though - "The market was down for 5 consecutive days prior to the crash on October 19, 1987." Nothing is a sure thing. The Dow monthly shows that this was about the 4th time of testing that level and so far it held so a bit bullish short term. The Dow weekly shows positive divergence on the RSI, stochastics, MACD and note that the histogram is still positive. Positive divergence is not a good timing indicator but it is a decent indicator just the same so we expect a rally to start not far in the future at least. (unless of course the divergence goes away as it may in a crash) Transportation averages This one made  new lows before the Dow and the Dow Friday making new lows confirmed that this is still a bear market - duh. But short term there is a little hook appearing on the stochastics and a hammer to boot - so we could see a bounce here. The Nasdaq has remained quite strong - well sure it gapped down a week ago and has been down each day since -ha - but in comparison to other indices it is holding up well not even a drop to the December lows so if this is all the shorts have strength to do maybe a rally instead. The S&P 500 to Nasdaq 100 ratio chart shows the parabolic move of the Nasdaq vs. the S&P 500 and to me this looks too steep for too long and would not be surprised if this week we see more money gong into the S&P and that it starts to outperform the Nasdaq. The summation index NASI has given a bearish crossover as the Nasdaq pulled back and has not yet show a sign of reversing. Nasdaq McLellan Oscillator NAMO has reached its oversold area and each time it does it moved back up at lest in the short term. The VIX moved back to its 50% retrace but is not especially bullish and if any encouraging news, mainly financial, comes out this could fall at first down to its trend line. Nasdaq 100 weekly still in a tight range above support. Not sure if the old triangle apex will mean anything but often they can coincide with a significant turn. Nasdaq 100 daily as it is the most bullish, the large cap techs received the most buying on Friday and it closed up for the day. The S&P 500 monthly  and a double bottom - most likely not at all the low long term but oversold indicators can turn up for a rally? The S&P 500 weekly MACD still has a positive crossover and histogram is in positive terratory. S&P 500 daily had a hammer on Friday. The very high volume was options related. Note a small hook on stochastics - maybe will not turn up but watching. The NYSE similar to the S&P. The percentage of stocks on the NYSE now trading above their 50-day moving averages is now at 15.6% while at the October low was at 1.1%. Maybe this is positive divergence or means it will go lower. The number of stocks making new lows each time is decreasing as in October it was 2901 and on Friday it was only 555. This could still be a retest but it is a bit positive. The NYSE advance/decline ratio chart also has higher lows so far which means overall more advancers. S&P 400 mid caps weekly has the RSI and stochastics still up from their buy signal at the Autumn lows. Russell 2000 also with the stochastic's hook and under the Bollinger band and a rally may be ahead. The Value Line Arithmetic VLE another small hammer at support. The banking index BKX monthly with RSI at 15 and stochastics at 7 all it will take is the belief that the Government will not totally wipe out the shareholders by nationalizing the big banks and/or some sort of even short term positive news and this sector too is prime to rally. If the reverse is true it continues in the direction of least resistance - down. The Chinese FXI at the lower trend line and stochastics at 20 so a possible point for a move back up in the triangle. London FTSE  did break below its trend line and closed at the low on Friday so nothing yet is positive. Tokyo Nikkei average back down 7% for the month but above the lows. Commodities CRB made fresh lows this week. Crude Oil weekly had dropped under 40 during the week so this continued relative strength maybe setting the stage for a move up. US oil Fund USO down 4.8% for the week with a small hook on the MACD and RSI is off its lows. The ETF OIL had two positive days as stochastics has turned up but not yet over 20. Gold weekly had strong move of 6% to close over 1000. If the market does rally this may begin a pullback but now the slightly weaker US dollar on Friday helps. If the Dollar steeply dips this could do the same on the upside but a pullback will come as it is over the top weekly Bollinger band. Gold Bugs HUI has not at all kept up with the large gold move which is negative but they could all of a sudden play catch up. We will watch gold stocks for signs of better set ups. The red line center chart is the HUI to Gold ratio and the HUI needs to outperform gold for gold stocks to be more impressive. The gold and silver index XAU 60-min chart - while we see GLD for gold in the upper portion making higher highs the XAU has not. Silver another new high this year though the ascent is pretty steep. The next resistance is at around $15.00 but it is overbought still so tighten stops.   The US Dollar pulled back to the top of its trend line on Friday after making a double top. A break of this support may lead to a decline of several weeks.     Butch Cooley Market Comments (Butch is founder of Leg Up House and the Butch Cooley Worldwide Hunting and Fishing . He has been an active trader for decades.) Stock Market Comments Wow...what a week this was!!  We tested old lows, and didn't hold them.  Gold popped and ran above $1000 an oz, but didn't hold that either.  The markets are really a mess and nervous and the economy is a mess too. A lot of things happened this week, but none of it pleased the stock markets.  First of all the Obama Administration came out with their homeowner lifeline, which totaled close to $75 billion.  That was a substantial amount more than the markets were expecting.  The problem is no one really likes the plan.  To be perfectly honest, from what I have read, it does in fact reward poor behavior and poor business moves.  I realize the idea is to stop the foreclosure rate, and to keep people in their houses.  The key here is to get people's mortgage payments closer to 31% of their monthly income.  And I suppose there will be some good come from it, but I just don't see it being worth the effort over time.  I don't see how this will offer any help to people who's homes are underwater.  Nor do I understand the need for that to happen anyway.  We operate in a free capital investment community.  You win some, and you loose some.  It happens to all of us every week in the stock markets.  I don't know why we are bailing out people who simply bought at the top end of the bubble.  We haven't offered to bail out anyone in the stock market who bought high and later sold low.  I just see it as a very expensive exercise in futility.  And I don't see how it will keep the housing prices from falling.  Pricing is about supply and demand.  And there just isn't a big demand for any housing right now.  And this money is not going to create a demand. Then the news on Allen Stanford broke.  Another scam.  Maybe not a large as Madoff, but certainly another mess to sort out.  What bothers me isn't the scam so much.  We will always have people ripping off other people, nature of the beast I guess.  What really bothers me is it now appears that the SEC let Stanford operate this way for over 13 years.  Madoff got away with his scams for over 10 years.  Once again, do we really need this SEC?  From where I sit, they are worthless.  Another item that is noteworthy, and it doesn't appear Madoff was even buying equities and securities for his clients.  Amazing. GM and Chrysler need more money.  Of course they do.  They aren't selling any cars or trucks.  And they aren't going to any time soon.  The question the Obama administration has to deal with now is whether or not to give them more money, or force them into bankruptcy.  Personally, and once again, I think we are rewarding companies for bad business decisions and bad business practices.  The UAW has to go.  Period.  I don't see what is wrong with bankruptcy anyway.  It serves a purpose, in that it lets a company have time, and credit to reform and become profitable.  If we give them what they want now, the will simply be back in a month or two for more.  It will never end.  So let's end it now. The big news for me this week was the FOMC minutes.  I wasn't shocked, but I was surprised as just how far behind the curve the Fed is currently.  They had been predicting 7.1 to 7.6% unemployment for 2009.  Well, we hit that pretty fast, and now they had to change to 8.5 to 8.8% unemployment.  They are still behind the curve!  We most definitely will hit 10% or more in 2009, even if we use the government's adjusted figured.  And the Fed also increased how much the economy will contract this year, to a low (high) of 1.3%.  I really think we are in much worse shape than the Fed realizes.  And once again, if these "bankers" don't have a clue, why are they running things?  California finally has a budget.  Well, sort of a budget.  They knocked about $13 billion out of their spending, they took some tax cuts and they added some taxes, oh yes, and they have to do some borrowing.  But it belongs to them, and it sounds all legal and law like now.  Good, so far we haven't had to bail out any States yet.  And we shouldn't.  It's really pretty simple. It's like balancing your check book.  I can't spend more than I have, that is, the law really frowns on writing insufficient checks.  So States can do it too.  They just have to cut back, or increase taxes (not too popular) or borrow.  And Kansas announced it was not able to pay State income tax refunds.  And they may not be able to pay their State worker's either.  Wow.  Maybe they need to increase taxes and borrow? I did get a kick out of Senator Dodd's statement on Friday that nationalizing some of the banks was "not" off the table.  The markets didn't like that!  But I was holding a lot of gold stocks and they certainly loved it.  For a few moments, I really thought the ship was sinking on Friday.  But the White House issued what basically was a denial, and that banks would remain private, and the market had a pretty fast recovery.  But my thanks to Senator Dodd for some good day trades in gold!! This nationalization thing is getting closer to reality than most of us want to believe.  It is a  very complex problem.  My opinion is just that, an opinion.  I may not have a clue what I am talking about.  But the problem with the big banks is the transparency, or lack of it, on their "toxic assets", (level 3).  I think Paulson and Bernanke looked into that box, and were shocked.  They closed the box and said let's give it to the next administration.  Well, now the Obama Administration has had a look at it, and they closed the box too.  It's got to be really bad.  And the problem is how to not let anyone get access to just how bad it is.  And that is a dilemma.  I said this before, and I am saying it again.  I believe all of the big 7 or 8 banks in the US are insolvent.  And the Treasury and the Fed  do not know how to deal with that.  I think they are as insolvent as Lehman Bros was.  But we couldn't let everyone go down now could we.  I think allowing Lehman to fail was a huge error on the part of the Fed and Treasury.  They didn't have a clue how deep this ran back then.  things are different now.  I have tried to think about what that kind of knowledge would do to our economy, worldwide.  I can't even imagine it clearly.  Talk about a run on banks!  Chaos comes to mind.  The problem with debt and negative balance sheets, they just don't go away.  This is the heart of the problem we are all facing today.  And one of my readers sent me a little tidbit this week.  It seems unemployment benefits in about 30 states now are being paid with debit cards.  It saves the states a ton of money they would normally spend writing unemployment checks. Millions of dollars saved actually.   The states simply contract with banks, and they money is deposited to each persons account who is on unemployment that week.  But, those banks are charging all kinds of hidden fees.  Of course they are.  They all have little known groups they hire  called "The Hidden Fees Department".  The job of these guys is to figure out how to charge us more money, without us ever knowing about it.  And if we do find out about it, make it so trivial, we won't bother complaining.  But this takes the cake.  These poor people are out of work and getting next to nothing anyway.  And who is involved?  BAC, Citi, JP Morgan, US Bank.  The big guys.  So, if you take all of your money out at one time, then it's free.  But if you don't, you pay service charges each time to use the card.  And if you call to complain, you get charged for the phone call, a debit charge against your unemployment benefits, for asking a question.  Make more than one withdrawal in a day, another surcharge.  It's amazing.  Why not just set these poor folks on fire!  Colorado has some new games they seem to be playing for those claiming unemployment benefits.  First of all, Colorado allows you to sign up on the internet.  Most states do that  but, before you "qualify" now, they send you a packet in the mail, and you get to fill out a bunch of forms that you already filled out on the internet.  Ok, you do that, and you send it back.  No checks come.  So when you complain, they tell you they have already issued you all the money you were entitled to collect.  When you tell them you collected ZERO, then they tell you they will look into it.  This is pretty cool.  I run several homes for people on low income in Colorado.  And a few of them were recently laid off.  All of them have been told by the Colorado Unemployment people that they had all been paid in full.  And none of them have received a penny.  These people were making $7 to $9 and hour and will be lucky to get a $150 a week to live on.  So now we have devised a way to delay their unemployment money and make it sound like it's their fault or an error.  Let's set them on fire too!!  Better yet, let's just move everyone on unemployment to Kansas, they don't have any money left!!  That would just be easier to do the math!  Like I said earlier, there are always people ripping off someone, it's the nature of the beast! BC     Here is a list of stocks reporting earnings on Monday. Check the updated Earnings Calendar on all overnight holds. Weekly economic calendar from briefing.com. To try futures trading you may sign up for a free simulated account that uses live streaming data. Futures have been very volatile so great opportunities right now for wide swings. When any of you sign up for a new stockcharts.com accounts there is a space to put in a referral name on that form. If you enter  stocktiger@stocktiger.com they give us credit. Thanks! Request: You have probably all seen testimonials on financial websites. Over the years I have received many in e-mails PMs and in the chat room and appreciate them but  never saved them in one particular place so would not be able to find them. I may want to use some on the site (will not use your name) and want them only to be real ones. So if you would like to say how the site, newsletter, blog, chat room or picks have helped in some way and made profits it would be greatly appreciated. Just send to: stocktiger@stocktiger.com Some I did find a few as examples: Great site, discovered it end of last year and watch your video daily.  First I would like to thank you for a very nice site. I am reading your weekend review all the time and I love it.  I've been lurking in the chat room for a couple of months now, and I wanted you to know how much I appreciate the hard work that you do, and the insight that you offer on a daily basis. I look forward every day to your morning commentary, the morning update, the week summary and the chat room. I've learned a lot listening to you and others that freely offer advise and trading ideas. Keep up the good work.  I am new to the site and am very happy that I have found it. I like your approach to  trading and posting the charts to help people know when to enter a trade. I have made a profit on almost every trade I have made and I am just getting started . Keep up the good work! I really enjoy your thoughts on Sunday evening. With your wisdom, you bring a lot of clarity into a foggy and chaotic market. Your system is the best I've seen since I've started trading! Thanks Featured Stocks One of our Featured Company ERF Wireless, Inc. ERFW  http://www.erfwireless.com/ There is no news this week but the company will be at the National Investment Bankers Association NIBA  conference this week in Tampa, Florida. They will make a presentation to share the information about the explosive growth expected this year as the Schlumberger agreement unfolds. The following week on March 4th the company will host a conference call to give more details to the shareholders of this monumental agreement. Last week we showed that the stock had gone down to support and the move back up was likely to begin. It did as the stock was up over 15% for the week. Another Featured company  America West Resources  http://www.americacoal.com/ AWSR plans to double coal production this year and has a main equipment rebuild in progress to be re deployed shortly.  The stock is still at the same level for over a month but stochastics remains very positive as it seems investors waiting for a time closer to the production increase and quarterly SEC filing in March. New Blog - Message center upgrade You may have noticed that we have upgraded the message center so now the blog can contain video and audio. It also has a nice clean look and we will be adding many news feeds over the next week or two for your convenience to be able to check on a wide range of business information at on place. (When the Tiger eye is colored that topic has new messages) At the top of some parts on the right there is a check mark - clicking that will collapse that section.   Remember to check the blog as information is posted many times each day - please post your own comments and charts.  In case you do not know, on the blog topic or any topic on the message board, if you click on the Notify button as shown above, you will be sent an email when new posts are made to that topic. If you trade ETFs our large list of them is here http://stocktiger.com/etf/etflist.php New additions to our watch list. Remember that we add many stocks to it each trading day. AMX  Short under $26.30 ILMN   With the gap and 200-day as support this may continue the bounce. If not could be a short on broken support. COMS  Short under $2.14 IPG  Short under $3.08 PRK  Short under $47.00 CCH  Over $13.00  Very low volume SWHC  Over $2.92 SIMG  Short under $2.70 WSO   Short under $32.70 THS  Over $28.50 Think of this as a joke - it is a mistake as it was on a list of stocks over $10 and I did not notice the price until after I drew the line. Do not recommend trading a stock this price but it was an interesting chart.......   For your viewing - Photograph by Julia Nikonova   Photograph by Boris_m   Photograph by Luluka   That's a full lid for today - will see you during the week. We have published a donation page for the ease of you giving to a charity of your choice. If you have benefited from our site we encourage you to share with a charity. We have a few recommendations who all use a high percentage of the donations for the actual program use. If you have some we should add please send us a note. Donation Page Check the Earnings Calendar on all overnight holds. 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