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Stock Tiger Stalking Stocks™
For Monday September 24, 2007
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Close Friday
Dow +53.49 at 13820.19, Nasdaq
+16.93 at 2671.22, S&P
+7.00 at 1525.75
The Fed lowered both the discount rate and the fed
funds rate by ½% last Tuesday so that is good for short term rates
but the US Dollar fell to 30-year lows so all people in the USA will
pay more for products made outside the US. In 2002 shown on the
dollar index below the price was at 1.20 and now at 0.784 - a drop
of about 35% in buying power. You go stay in a hotel outside the US
and pay 35% more - or buy food or cars or clothes.
The good thing is
for
companies that export and companies with overseas profits. The
awfully weak dollar means that foreign buyers have to spend less of
their currency for US goods and services. They can buy shares in US
companies at a nice discount so this does help at least short term
to prop up the stock prices. The weak dollar also helps to push up bond yields
however and that is not good as it will lead to higher interest
rates for homes and other long term investments.
The FOMC's decision on Tuesday to cut both the
fed funds and discount rates by 50 basis points was interesting. It
was expected that they would cut at least 25 points and some thought
and hoped it would be 50. The interesting part is that only a couple
of weeks ago the Fed was stating that their big concern was
inflation so this is a big change that they now decided to ignore
the inflation in favor of trying to stimulate the economy. In doing
so this may help to make more inflation so a tough call.
Interesting time when the big caps are near their
all time highs while the economy weakens. The credit market problems
are beginning to be felt as home prices drop. Home foreclosures are
increasing quite rapidly and this is putting added supply on the
market so more layoffs in the housing sector jobs. When people loose
their homes they have to rent so that is one sector that will
benefit. It though also means that in those areas the rents will go
up adding to inflation. Oil is at highs in front of the heating
season while unemployment is increasing. These are not normally
things you expect to see as the Dow is near its all time high but
our long picks still out number our shorts buy 10-1 easily. This
will change but we cannot say when. It would be logical to expect a
recession within the next 6 months, if we are not yet in one, as
rate cuts generally take some time before they actually change
anything. Also, so far we have the bond market saying that they
still want longer term rates higher and this will increase mortgage
rates and cut home buying. If the cuts increase and stimulate the
economy in other ways we could maybe avoid a recession but what
about inflation? Not living in the USA I do not have any first-hand
and hands-on data but do hear that daily life does cost a lot more
this year than last. Gold prices going up shows the market's concern
of inflation but so far most gold stocks have not rallied behind the
gold price increase. All of this is interesting but the charts show
what is actually going on so lets take a look.
All indices up this week but 10-year note also higher - not so
good
The top up and down sectors
The Dow is at the
top Bollinger bands but not outside. The 13,690 level is an easy
stop point if you are long. RSI is not yet over 70 and though there
is no defiant thing that says it will get there, it does show that
it is not so overbought that the test of the high will not proceed.
Actually all wonder more what will happen at the test and if a break
out - just how far?
The Nasdaq shows stronger recent
volume on up days than down and the 3-day consolidation is good so a
jump to test the highs may take place with support near the dotted
line.
The NYSE has a similar pattern with
stochastics over bought but not the RSI though the advance decline
volume shown 2 charts below seems to be lagging which may indicate a
fall to come.
The percentage of stocks in the NYSE that are
trading above their 50-day moving average hit a very low level in
August of 7.6% but now it is back to 66%. The 80% area is one that
in the past represents over bought conditions.
On the lower section of this chart you see the
NYSE as it peaked in July the advance-decline volume was at a
high. This time as the NYSE is near its high the A-D is not close to
where it was so suggesting a negative divergence warning
The Russell 2000 is one of the weaker
indices. It did on Wednesday break out above its 806 resistance but
would need some traction soon and a move over 830 to have the small
caps get back into the game.
The QQQQ monthly actually looks good and
the super high volume lat month is impressive on the chart.
The transportation index is still weak
and below the 50 and 200-day EMAs. FedEx this week said that it
expects weaker US sales. The markets like India and China however,
along with the European markets continue to buy US good so the
shipping there is going well. I guess most of the profits in this
index come form domestic transportation.
Oil broke out to a new high as it is
still priced in US Dollars, as the Dollar falls this price goes
higher.
An easy way to trade oil is with this fund USO that trades
like a stock
The Fed is cutting its rates but they are overnight rates but as the longer term
30-year bond shows these are going up. This predicts that mortgages rates and
other longer term rates will go up.
The Japanese Yen - the markets memory is poor. The S&P 500 shown on the
lower section of the chart, took a big drop as the yen rose the last time to hit
these levels. I guess it was a bit of a panic thinking the carry trade would be
unwound. So far now the traders are sill in their positions but this is still an
chart to monitor as if the yen get too high it will force selling to cover the
short yen positions.
The US Dollar sad if you use US dollars to buy
in foreign countries or buy any foreign goods. I used to get 32
rubles for each dollar and now get only 25.
Gold is making multi year highs perhaps spurred on with
inflation worries but usually rate cuts bring the go along with
lower gold prices not higher ones.
The gold miners ETF shows that even though it is near its high it has not broken
out. If you look at 50 or so gold stocks you will clearly see that they are not
following the lead of gold prices. During the run of gold stock in 2005 and
early 2006 the stocks were in front of the gold price move. Unless many more
gold stocks join the party we can expect a pullback.
Economic calendar from briefing.com
NNRI NNR, Inc has very good news this week.
NNRF Announces Installation of FEECOM/BIECOM
in Central European Nuclear Facility
When the official order comes in it will be
the first major international order outside the Russian Federation.
E.ON is a major European supplier and operator of nuclear
facilities and one of the largest in the world so this gives really
great credibility to NNRF. As you know, the European law (directive
of the European commission 3099) obligates all users of lead to
bring the toxic emissions down to ''zero`` by 2010. For nuclear
power plants this represents large quantities of lead that need to
be replaced and FEECOM/BIECOM is likely to be the major replacement
for lead. In Germany alone, there are 17 nuclear utilities with
1,615 metric tons of lead, which is the equivalent of 1,300 metric
tons of BIECOM. The current sales price of BEICOM is between
$24 – $33 /kg so 1,300,000 kg would be between
$31.2 million and $42.9 million if all the lead at the plants in
Germany alone were replaced with BIECOM. This would not come all in
one year but this is to show the scope of the need. Besides the 17
nuclear plants in Germany there are 59 in France, 7 in Belgium, 10
in Sweden, 15 in the Ukraine - etc - actually a total of 195 plants
in Europe including the non EU countries. NNRF is also in
discussions with other utility holding companies in Western Europe
and South Korea. Here is a
map of
Nuclear Power Reactors in Europe
NNRF also announced a new family of materials based on the above for
X-ray protection in medical and dental applications used in
doctor's and dentist's offices and hospitals daily. This may mean
significant new sales in these materials. The company on another
matter also stated that NNRF shielding and disposal technologies for
these G-8 funded projects are currently undergoing final engineering
at the Russian engineering agency charged with the responsibility of
specification of the required materials for these projects. As you
know, formerly NNRF was chosen by the project management team of the
NDEP and ICES - the Moscow based International Center of Ecological
Security - as one of the sub-contractors in this US$4 Billion G-8
funded project. See the press release above for more information and
links.
This is an exciting time for NNRF as they will soon
begin production of FEECOM/BIECOM and their new applications and
they are progressing in many areas they have talked of earlier as
the forth quarter will see revenues from these new areas. Over the
last 2 months as the private placement buyer's restricted shares
from over a year ago have been freed up, the new buyers of these now
freely trades shares have come in and the price has been rising
slowly for these 2 months as the new buyers accumulate for the move
higher. There are still more shares to be freed up but we do not
think this process will take much longer. The total number of shares
has not increased it is only that some restricted shares are now
free trading so the active float is larger which is a benefit as now
larger investors, funds and institutions can participate. The 50 and
200-day EMA are at the same price and this often means a move is
soon to come and as the stock is in an uptrend from the $1.80 low we
expect a break out to that upside for the next major move.
This shows the multiple support levels and how they keep going higher.
PLTG Looks like the 20 cents is now support as MACD
still heading up on the long term play. Corporate wise very good
progress on the gas and oil wells.
Other stocks on our long term agenda are still in a similar pattern
to last week's so we hold them.
Additions for the watch list:
LWAY was on our list as a pullback play and still looking
good so maybe a break out at $17.75
LFC Over $78.11 then $78.48
MA Over $152.00
FSLR Over $112.80 may go to $123.21 top
resistance
GILD Over $40.65 or on a pullback not under
$39.
LKOX Over $40.65 or on a pullback
DAR Over $10.00 and $10.25 - with $10.44
shadow
YUM Over $35.05
CELL seems rather extended so may need a
pullback - but still a play over $14.75
MMM tried to break out 3 times - maybe one
more time over $92.00 - has various levels - recent high is $92.50
VRSN was on our list before but it pulled back
- now may try again over $34.00
ALXN Over $66.00
MCZ Continuation over $1.21 or on
pullback
Interesting Symbol with
break out over $678.78
In a boulevard park strip between the roads
they put in a few topiary figures though these shots were a while
back before they grew in fully.
That's a full lid for today - will see you all
during the week.
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