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Stock Tiger Stalking Stocks™
For Monday January 28, 2008
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Close Friday
Dow -171.44 at 12207.17, Nasdaq
-34.72 at 2326.20, S&P
-21.46 at 1330.61
 President
Bush wants to give out some money! From the taxpayers who gave it to the
government back to the taxpayers - though
it will likely end up in paying off dept or taxes.
"I believe that with swift action, we can give our economy the boost it needs to
continue expanding and creating new jobs for our citizens,'' Bush said today in
his weekly radio address.
I am one that does not share the president's optimism that these $300,
$600 and $1,200 checks will do much for the economy at all. The number of home
foreclosures continues to grow and car loan defaults have not started yet in a
big way but may.
The idea of giving people money is that they will go out and buy things with it and
prop up the economy. They are more likely to pay a car or house payment, pay
down debt or maybe with luck put it in the bank. Some of course will spend it on
"things" and some of those may have been made in China so this will help to boost the
Chinese economy. Funny thing is the US gets a lot of its money by borrowing it
from China in the first place.
I liked what Rev Shark at realmoney said: "The economic stimulus package should
be called the Pack of Smokes, Dinner and a Movie Relief Act of 2008"
Maybe this is harsh as $1,200 is real money and can help families to make some
payments but thinking it will pull the economy out of recession seems good
imagination is all. The government has been very irresponsible in its actions to
encourage people to spend, spend and spend some more and they are now doing it
yet again. Instead of going out of the stock market bubble and letting things
work themselves out they encouraged the housing bubble with no oversight of the
bad practices of banks in duping people into buying over priced homes they could
not afford.
If the government promoted savings then people would not have this runaway debt.
Now with the stimulus package they want you to spend even more. If they really
wanted to kick start the US economy they could have gotten creative - like how
about vouchers for purchase of US made items. Or that the checks are only
redeemable at WalMart. Seriously though my point is that this looks like an
election year stunt and it may end up costing not helping the economy in my
opinion.
As for the Fed action this week - amazing. As we stated in a recent newsletter.
Remember that the Fed is not the government but led by people from profit making banks and they
look out for themselves.
Last weekend the French bank
Societe Generale found out that they had a trader that had broken through their
security system and for weeks was making un authorized trades. By what would be the market
open on Monday he had losses of over $2 billion and the bank wanted to close
those positions but how to do it without hugely dropping prices of the stocks
they wanted to sell. Supposedly the Fed says they did not know of this and even
though a rate cut may help out the selling that was only a coincidence.
Believe what you will. The loss in the end may be $7 billion for the French
bank. (Regional Fed President Poole voted against the interest rate move
with concerns that it was not justified ahead of next week’s
meeting.) Now the market has priced in an additional 50 basis point
cut this week with smaller odds for 75.
The intra meeting Fed rate cut was generally viewed in a rather negative way. Not
the cut exactly but the timing of it.
Stephen Roach, head of
Asia for U.S.
investment bank Morgan Stanley , said the Fed may have let itself be
goaded into action by a market panic.
"We have a market-friendly Fed possibly injecting a lot of
liquidity in the system which will set us up for another bubble
economy,"
Roach told Reuters.
"I'm sort of worried that all they did yesterday was to hit the
snooze button," he said. "(This is) excessive monetary accommodation
that just takes us from bubble to bubble to bubble."
Quoted from the Financial Times
"Hence, we quickly learn what sheer folly and utter
irresponsibility it is for the Fed to use its limited ammunition to
intervene in equity prices. Their panicky rate cut was not
to insure the smooth functioning of the markets, but rather, to
guarantee prices.
As we have been saying for the past two days, this is not the
Fed's charge. They are supposed to be maintaining price stability
(fighting inflation) and maximizing employment (supporting growth)
-- NOT guaranteeing stock prices."
Also from the
Financial Times George Soros wrote:
"The current
financial crisis was precipitated by a bubble in the US housing
market. In some ways it resembles other crises that have occurred
since the end of the second world war at intervals ranging from four
to 10 years.
However, there is a profound difference: the current crisis marks
the end of an era of credit expansion based on the dollar as the
international reserve currency. The periodic crises were part of a
larger boom-bust process. The current crisis is the culmination of a
super-boom that has lasted for more than 60 years."
With so much negativity we should add:
Even though the bear may be here
quite a while, according to Investor's Business Daily, nine of the
biggest positive days in Wall Street history occurred during the
bear market of 2000 to 2002.
Remember if you are not trading as many stocks you can
benefit on up and down days by using the market ETFs. We prefer the
Proshares as they move more:
The most popular index ones are:
NASDAQ 100: (QLD) [2x long]; (QID)
[2x short]
S&P 500: (SSO) [2x long]; (SDS)
[2x short]
Dow 30: (DDM) [2x long]; (DXD)
[2x short]
Russell 2000: (UWM) [2x long]; (TWM)
[2x short]
Here is a list of all:
ProShares
Fundementally the S&P 500 is not overpriced in general terms. It is
at a PE of near 17 and has expectations to grow earnings at 15% this
year. The historical norm PE is about 15 with a low of under 10 in
the 1970s and a high over 30 in the late 90s.
Our charts do point out that we are in a bear market and
that this generally means it will last many months if not years. The
credit problems are obvious as are the weak dollar the huge US
deficit and the continuing war etc. The contraindicating positive
could be that since everyone is writing of how awful it will be and
how no country in the world will be totally unskathed that it is
always possible that we may have a really major rally if the street
starts to think these negatives are priced in. We do not need to
make any long term bets but just be aware that the market can
surprise and if they decide to rally big time we will be happy to be
long.
This week is the end of month so perhaps we will have some window
dressing at some point in the week.
The performance of the major indexes for the week: Year-to-date,
the Dow is now down -7.9%, the S&P 500 -9.4%,Nasdaq -12.3%, and the Russell 2000 -10.1%.
The weekly sector
performance:
The Dow closed up for the week. At its high it made it back to the 50%
retrace. The bearish 200-day / 50-day crossover is in place now and a rally to
the 50-day EMA may be a bigger shorting opportunity.
The transports have come
back up to their 50-day EMA. If there is more rally left then
watch the trend line near the 200-day EMA for resistance and
possible shorting. A break above the trend line will be bullish.
The daily Nasdaq
chart sure is a sorry sight right now. RSI however did go under 30
and in the past turned out to be a buying opportunity.
I noticed this Nasdaq chart
from "chart of the day" and it did not seem correct as it shows no
broken longer term trend line.
I generally use log scale charts so mine looks this way with a clearly broken
trend line on this weekly chart but then pulled back up.
I made this one using linear scale and this is
right at the trend line but of course under the 200-week EMA. So we
point out that you can always check both type of charts. In this
case I believe the log scale above as the trend is at the 200-week.
However on this one the bounce did come right at the line.
QQQQ Monthly - Nasdaq 100 has gone down to the 50-month EMA that we
mentioned last week and it could turn around but the MACD is only now looking
like there may be a crossover while RSI and stochastics are still falling. If it
breaks the 50-month it has the trend line near $40.
The semi conductor index weekly chart
had held the summer 2004 support. You can see that these price
levels were the same in the spring of 2002 so not much good holding
these long term as of yet.
The daily chart of the S&P
500 shows it now is at the 50% retrace resistance. A further
move up to the 1400 area near the 38% retrace line and 50-day EMA is
probably a short opportunity for longer term. According to Goldman Sachs, the
nine bear markets in the S&P during the past half century
lasted an average of 384 days (until markets had regained their
peak), with declines at their lowest point of -32%
The S&P 500 weekly chart show it is
right under resistance and the 200-week EMA. RSI though is low and
so is stochastics.
The Russell 2000 had a very nice move up from
the lows but ended up still under the 200-week EMA as on this weekly
chart.
The NYSE bounced briefly
back up to the 50% retrace and closed lower on Friday. The 200-day
is now above the 50-day EMA and that is bearish.
The number of stocks on the NYSE
that were trading below their 50-day average came back to the 20
line so relieved a bit of the oversold condition but still at low
levels. Last Tuesday there were 1114 new lows
on the NYSE and 877 on the NASDAQ, some of the highest numbers ever
recorded. This set up the bounce but when such high numbers show
that generally means that the lows have to be tested at some point.
The Value Line monthly
chart shows the the 38% retrace may provide some support and a
bounce but now the long term trend is down.
The Japanese Yen has pulled back to support and at some point will again
test the 50-day EMA.
Gold has been a good performer and we
have had several gold stocks do pretty well from our break out list.
It has made a little double top and has negative divergence showing
on the histogram, the RSI and the stochastics so these warn of a
pending pullback. Gold is not very liquid (as compared to the markets
like the S&P as an example) which means it does not take a whole lot
of money to move it. This also means that it can at times get quite
overbought and make higher highs as we have seen in the past like in
November. At some point a pullback to the trend line could make a
buying opportunity. If you do not trade futures you can play gold
using the ETF GLD. You can go long and short it and it trades
at a price about 1/10 that of gold.
The US Dollar still holding above its low
This week we add a new regular
feature contributor and welcome him here.
|
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.)
Week Ending January 25, 2008
Looking over the proposed Stimulus package coming before
the Senate, and I think we have all kinds of trouble
brewing on the horizon. The main problem I see is the
attempt to raise the amount that can be borrowed at
Freddie and Fannie. Currently, I think that amount is
$417,000, and the discussions I’m reading raise the
amount to some where between $650,000 and $720,000. In
the House version, there seems to be a requirement for
about 20% down, and that is still a lot of money, even
for those who have money. There is going to be a lot of
Senate debate on this item.
Obviously this provision is included to help out
mortgage financing in areas like California, Seattle,
NYC and Washington DC, where home values are still way
above the median of $210,000 (US median). In places
like these, you are looking at price of $500,000 and
more. It doesn’t help many others though.
The problem I have is this package is simply an
artificial way of keeping home values from finding a
bottom. And I pretty much think they need to find their
own bottom, without government intervention.
The other problem I see is the risk of these new notes
is back on the government “monkey“, (that is the
taxpayer…..people forget that), who didn’t create the
problem to begin with. It’s a form of bailout and they
don’t work well.
You don’t really borrow money from Freddie and Fannie.
You borrow from a bank or a mortgage company, and
Freddie and Fannie buy those notes and keep money
pumping into the real estate economy. But, they are
insured, by the government, …..the monkey…the taxpayer.
My question would be what happens if these loans go
under? And Freddie and Fannie have had their
“accounting problems” recently, with a few scandals of
their own. Who is going to ride herd on them?
I don’t think much of government Stimulus packages to
begin with. In my opinion it’s all pork fat, and it will
be too little, way too late. I’ve yet to see the US
government fix a problem. They throw money at a
problem, but they rarely fix anything.
Leave well enough alone, and let the problems work
themselves out, as I think they will and should.
And I see where NYC has now filed lawsuits against
Countrywide’s officers, a couple dozen underwrites etc,
for what appears to be fraud. I was wondering when we
would start to see the legal eagles get into the
picture. I think suing for “greed” and or stupidity
would be a better allegation, but I’m not sure greed nor
stupid is illegal in the USA!!!
Regarding bond insurers like Ambac and MBIA, NY
apparently is in talks with banks claiming a potential
shot in the arm of about $15 billion should get us over
the hump. I doubt that seriously. Liquidity, leverage
and exposure are the issues for these companies, and
others like them. They don’t have the capital, their
exposure is tremendous, and they can’t survive without
“serious” injections of capital, to the tune of $200
billion plus!! It could go higher, as no one is
confessing the actual leveraged amounts. But say it is
$200 billion. Who the hell has $200 billion laying
around. Dubai, MSFT, even Berkshire Hathaway?? Not
sure any of these guys are real interested in buying a
dead goat???!!! The only other logical entity, with
that kind of clout, is the US Government. I hate to
admit this, (remember the Savings and Loan bail
out??….and do you see many Savings and Loan Companies
around anymore??) but the US government just may be
“forced” into buying these dead companies. The part I
hate to admit is Jim Cramer already called this and he
could be right. I hate it when he is right!!! But give
credit where it is due.
**************** Some really disturbing comments from
CEO's at the final day of Davos, Switzerland meetings:
Citibank:
"It is going to take some time for these things to work
their way through the system".
"In a 9 inning game, I think we are in the 5th inning".
"As we look out into 2008, I think there will continue
to be downward pressure on home prices, that will
continue to put downward pressure on all
mortgage-related securities,"
"The Fed (rate) cut and the fiscal stimulus package are
not going to help declining house prices in the U.S..
That problem is likely to continue."
Merrill Lynch:
"In will be while before you see a normalcy return to
banking and the markets".
Japanese Prime Minister Yasuo Fukuda:
"There is no need for excessive pessimism. At the same
time however, we should respond quickly and should
implement necessary measures,"
World Bank President Robert Zoellick:
"Some firms are going to have some big losses (and) I
don't think this has fully run its course,"
Bert Heemskerk, chief executive of Dutch bank,
Rabobank. said European banks faced worse losses
from the credit crisis.
"Quite a few banks are heavily involved, and in
particular if you look at European banks, we have
not seen the worst. The news has not been spreading
out about the losses that the European banking
system has to take," This is all pretty pessimistic stuff coming from
some really top people in the financial sectors,
from all around the world. What ever your take, it
just doesn't sound real good in the near term.
BC |
Economic calendar from briefing.com - a very busy week and many
earnings also.
Long term stocks of interest:
NNRI
NNRF, Inc is now in the year end audit process as promised for ATOLL and NNRF.
We expect similar solid performance from ATOLL for the 4th quarter
as in the third.
For the first quarter ATOLL did $18.9 million is sales with after
tax profits of $5.03 million. (NNRF owned 13% at that time and since
March 13 owns 50%) Quarter 2 was $19 million is sales and $4.25
million in after tax profits. Quarter 3 was $18.7 million in sales
and $3.5 million in after tax profits so the full year will be very
good. This is the time of year in Russia in which they tender for
contracts so later on we can learn of the ATOLL order book for 2008.
Last year this was given in April. The company has not yet set the
time and place of the shareholder's meeting but it is
anticipated to be around mid March. As you know the stock will move
to the OTC once the comment period with the NASD is finished. The
company has no control over this timing.
NNRF, Inc and Engineering Center of Nuclear Containers are designing
and developing dual purpose transport and storage containers for
solid high level radioactive waste. We put up a video of a test of a
different container (not the ones being developed by them and not connected
to NNRF or ECNC) However the video shows the rigorous kind of test
such containers go through.
Tests Video
The stock price will obviously start to move back up and hold its
price once investors feel the bottom has been established and they
do not want to be left behind. We do not know when exactly this will
be but the chart
shows that the MACD has had positive divergence for 2008 and the
histogram has also remained positive. The Chaikin money flow has
also moved into positive territory and all of these suggest that the
turn up will not be long in coming. Fundamentally the stock
price is too low for the value of the company. The accounting
integration of the ATOLL results into their own will make this much
more clear to many.
CYRX When the price had gone to the $1.50 area we mentioned
that we were selling short term shares to lock in some profits as we
had bought near at $0.70
and the price had doubled and the stock candles were above the top
Bollinger bands. The company had announced the relationship with
FedEx and that is great but the ramping up of production would not
happen overnight so it was likely the stock would pullback which it
has. It may go lower but the upside greatly outweighs the downside
so buying back on weakness seems a good situation.
SIPC as you know it is low volume now while waiting on
further progress and it stays in our price range. I believe the
filing of the financials with the SEC may come this week or next.
This is mainly important as when done they can file with the SEC to
be allowed to move to the OTC.
Additions to the watch list:
HIMX Over about $5.40 or a pullback to about $4.90 with a
tight stop
ISYS Watch for additional pullback
to $25.50 - $25.75 area or a high volume move over $25.50 ish
KRE This is a banking index ETF - not
exact break out but maybe back over $37 again on good volume it may
run to the $38 trend
MATR This broke above the flag pattern
on Friday so now on increased volume over $31.00.
DENN It tested the recent shadow high of
$3.55 on Friday and pulled back. Has possible re entry levels at
$3.35 and $3.45 also.
OMCL Moved over a $29.60 possible
entry area on Friday and pulled back. A second try there may work
out of on a break over $30.50 but note that this stock often leaves
a top shadow so take profits as needed.
HES A move back over $91 may work out on
good volume as this broke out of the bull flag on Thursday. IN a
bull market this is one of our favorite trades as they in that time
often return to their highs. Now however, we do not have the market
wind at our backs so more caution is needed.
HOTT This moved over the $5.00 level
oh Friday but looks like it may test the $5.40 to $5.58 level. With
a stop under Friday's low this may be worth a trade.
MSO On a break with good volume over
$6.75 -$7.00 or a pullback play in the next couple of days on a
rebound as it has been pulling back on lower volume. Watch for
reversal.
QTM A bounce here with stop at $2.36.
Could be shorted on a break down but the volume does not suggest
that will happen
ARNA Short
under $7.00 - aggressive under $7.35
Vadeem Tuhonov night
scene
D. Kushch sunset
That's a full lid for today - will see you all during the week.
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