Wednesday, August 31, 2005

Who said month-end markups don't exist?

Wow. How's that for a strong close on the month. Since there was nothing major than happened today to cause the rally, I would chalk it up to a big scoop of month-end markups topped off with a nice dollup of short covering. Whatever the reason, I'll take it. I only wish I had stayed 100% long. I took some additional profits, and am now probably closer to 60% net long.

The SPX and Nazz both gained +1.0% on strong volume. That makes for a nice accumulation day, and possibly the start of a new rally attempt. But we will have to be on the lookout for confirmation next before we make that call. Otherwise, this could just be a short-term pop prior to another re-test of the recent lows.

Also, I highlighted the Hi/Lo index yesterday. The turn higher continues, with more than 200 new highs on the NYSE today. So there is some leadership to be found. And not just in energy (though those names are en fuego).

One thing I learned the hard way...

"One thing I learned the hard way was it doesn't pay to get discouraged. Keeping busy and making optimism a way of life can restore your faith in yourself." - Lucille Ball

Morning News of Note:
  • IACID: Diller's IAC Intends to Enter Real-Estate Brokerage Business IAC/InterActiveCorp, which spun off its Expedia Inc. online-travel business, is moving into the real-estate brokerage business. The New York company, run by Chairman and Chief Executive Officer Barry Diller, plans to open several real-estate brokerage offices in the Pacific Northwest during next year's first half, said Rebecca Anderson, a spokeswoman for IAC's financial-services and real-estate division. (Full Story) WSJ
  • U.S. GDP: U.S. Economy Probably Grew 3.4% in 2nd Quarter, Survey Says The U.S. economy probably grew at a 3.4 percent annual rate in the second quarter, the same as initially estimated, as consumer and corporate spending let companies reduce inventories, economists expect a government report today to show. The projected expansion of the gross domestic product, the sum of all goods and services produced in the U.S., is based on the median estimate of 72 economists in a Bloomberg News survey. (Full Story) Bloomberg
  • GOOG YHOO: ONLINE AD WAR Yahoo! is seeking to challenge Google as the go-to place for online advertisers, as the Internet heavyweights increasingly go head-to-head in big marketing pitches. The rival search engines have been making aggressive moves to lock up multi-year ad deals with partners in their fight for online ad dollars. (Full Story) NY Post
  • LCDs: LCD panel mkt to veer back toward oversupply in 1H06 - DigiTimes: DigiTimes reports, citing study, that although oversupply of TFT LCD panels is expected to ease this quarter, demand for TFT LCD panels will still run short of supply by 12% in the 2Q06. Demand for TFT LCD panels this quarter will lag supply by 4.9%, down from 10.4% in the 2Q. However, balance in the TFT LCD panel industry will again tip towards oversupply starting from next year, and supply will outpace demand by 8.17m panels in the 2Q06.

Market Comments: The market opens lower again this am, on a slightly weaker-than-expected GDP report, and a much weaker Chicago PMI (49.2 vs. 61.0). The weak economic reports have the 10-year Treasury yield back down near 4.0%. Boy, is that yield curve ever flat.

The silver lining here might be that with weaker economic data, and an emerging energy crisis out of Louisiana, the Fed might blink and take a pause in raising rates. That would turn out to be bullish for the markets. Beyond that, let's watch for another potential late day rally on short covering. (75% net long)

long GOOG

Tuesday, August 30, 2005

Not a bad close

The market staged another strong rally into the close, but not enough to make it all the way back to positive territory. The SPX was down more than 10 points with a half hour of trading left and rallied back to finish down less than 4 points. If they had just extended the trading hours a little...

As I wrote about yesterday, the focus today remained on the damage from the storm and how it would affect our energy-related assets. That pushed oil back above $70, even though it closed down on the day.

One other thing that stood out to me was that the Hi/Lo index actually expanded nicely today on both the NYSE and Nazz. I think the internals are solid, and that the market has more of a bounce to come.

Stock of the Day

I have two SOTD's today. The first is Alpha Natural Resources (ANR). This is a fairly recent IPO. The company operates in the coal industry, which we know is red hot right now. With natural gas prices spiking, I am looking for coal-based alternatives to remain in strong demand. The stock looks like it is breaking out of a nice cup-and-handle formation on above-average volume. Above $30.50 would be a new high for the stock.

My second SOTD is Nvidia (NVDA). The company makes graphic chips for the PC and handheld markets, as well as video games. The stock broke out on strong volume on 8/12, and then proceeded to embark on a low volume pullback (LVPB). Today, the stock is again moving higher on above-average volume. This action is also notable given that its competitor ATYT reported weak results this am.

"No facts are to me sacred; none are profane; I simply experiment, an endless seeker, with no past at my back." - Ralph Waldo Emerson

Morning News of Note:
  • Oil Reserves: White House May Tap Oil Reserves Closure of Wells in Region Prompts Capacity Concerns Amid Fragile Global Supply Hurricane Katrina's march through the Gulf of Mexico and its key oil and natural-gas production facilities sparked fears of damage and rattled energy markets, moving the White House to signal its willingness to open the nation's emergency oil stockpile if needed. The extent of the hurricane's effect may not be known for weeks, and preliminary inspections of offshore oil and gas facilities have only begun. (Full Story) WSJ
  • California Gas Cap?: California Watches Hawaii's Effort to Cap Gasoline Prices With chronically high pump prices straining its laid-back ethos, Hawaii embarks this week on a radical experiment to cap gasoline prices, a move being keenly watched nationwide by legislators and consumer groups eager to rein in record fuel costs. Interest will be especially high in California, a unique market that some experts liken to Hawaii's because of the high prices charged by gas stations and big profits reaped by a few in-state refiners (Full Story) LA Times
  • GOOG MSFT: Google asks court to void Lee's Microsoft pact Google has asked a federal judge in California to rule that Kai-Fu Lee's contract with Microsoft is unenforceable and that the researcher should be allowed to join Google unfettered by the terms of his employment deal. The two rivals are locked in a legal dispute over the hiring of Lee. Google announced on July 19 that it was hiring Lee to head up a new China research center. (Full Story) CNET
  • YHOO: Yahoo! unveils new e-mail search function - CNET (33.68 ) CNET reports that Yahoo on Tue announced the phased rollout of new search functions for the co's free Web-based e-mail service. New features include the ability to search e-mail header, body, and attachment content; display snippets or short excerpts with highlighted matches on search terms; view thumbnails of all the pictures and documents saved in their e-mail account. The new search functions will be available Tue to a subset of Yahoo e-mail users, with general availability coming within the coming months.

Market Comments: The market opened lower this am, after a strong upside reversal yesterday. I would love to see the same sort of late-day strength today to spark additional short covering into the close. Energy stocks are up again in early trading, while retail stocks are mostly lower. WMT had to close 123 stores due to Katrina.

Factory orders (-1.9%) and Consumer Confidence (105.6) both came in above expectations this morning. I am still 100% net long.

long GOOG

Monday, August 29, 2005

Stock reversal

After a brief dip in the first hour of trading, stocks are meaningfully higher now. Hurricane Katrina has been downgraded to a Category 3, and oil is trading near it's lows for the day ($67.50). This should help bolster sentiment for stocks, and lead to a strong close today.

Here is a partial list of stocks moving on above-average volume:
  • High-volume advancers: ASVI, JOYG, HOS, CVH, ADVS, BECN, BR, IPS, OII, EOG

  • High-volume decliners: NSE, CENT, ISLE, ASGR, IIT, HW, AMED, AHL, PNK, HZO

"Every man has a right to his opinion, but no man has a right to be wrong in his facts." - Bernard Baruch

Morning News of Note:
  • Oil: Oil Soars to Record as Hurricane Katrina Shuts U.S. Production Crude oil soared to a record above $70 a barrel in New York after Hurricane Katrina forced companies including Exxon Mobil Corp. and Chevron Corp. to evacuate rigs in the Gulf of Mexico, where 30 percent of U.S. oil is produced. Oil had its biggest gain in 29 months as Katrina, the U.S. Gulf coast's worst storm since 1969, disrupted production and headed for refineries that make as much as 15 percent of the nation's fuel. Hurricane Ivan last September cut the region's oil output by as much as a third. (Full Story) Bloomberg
  • ALL: Allstate, Insurers May See Record Claims From Katrina Hurricane Katrina may cost U.S. insurers such as Allstate Corp. as much as $30 billion, making it the most expensive storm to ever hit the U.S., storm modeler Eqecat Inc. said. Katrina's center was about 85 miles south-southeast of New Orleans at 5 a.m. local time, the U.S. National Hurricane Center said. The storm, with winds of 150 miles (241 kilometers) an hour, was moving north at 15 mph. Shares of European insurers including Allianz AG declined. (Full Story) Bloomberg
  • KNOT TGT: Knot Inc.-KNOT may be bought out by TGT-BusinessWeek Online: According to BusinessWeek Online sources, TGT is a leading candidate to buyout wedding planning site KNOT, which it already has a business relationship with since April. Both TGT and KNOT declined to comment
  • US Economy: Fed Chariman Greenspan said asset price targeting unlikely anytime soon; US housing boom will inevitably simmer down; end of boom will slow consumer spending; home prices may decline; expects Fed to refine risk management strategy; Fed cannot ignore inflation pressure in fiscal gap outlook (Saturday)
  • WMT: sees Aug SSS up 3.3% vs prev guidance up 3-5% (Saturday)

Market Comments: Classic market action of keeping investors on their toes, as well as catching the majority leaning the wrong way. I closed my portfolio Friday at 100% net long. So I was sweating today's open a bit when I saw the storm fears brewing. But after a brief dip lower, the market quickly bottomed and now all of the major indexes are in positive territory. I know it's early, but so far this is bullish action.

Katrina, Katrina

The futures are currently pointing to a lower open, as all eyes are watching the potential damage from Hurricane Katrina. I got a flash report last night about the storm, and the overnight futures were even lower than they are right now.

A Category 5 hurricane in the most severe type measured, and insurers say the damage could be the most costly in US history. The economic damage could include oil & gas refiners near the Gulf of Mexico, as well as the Port of Louisiana, which is the fifth-largest port in the world in terms of tonnage, according to Stratfor.

There is also a big risk in terms of the human toll, since New Orleans sits below sea level. My thoughts and prayers go out to everyone in that region. Expect the media coverage today and tomorrow to be dominated by storm updates.

As for the market, energy stocks of all sorts are already rallying, while insurance stocks are taking it on the chin.

Sunday, August 28, 2005

This and That

Here are some links of interest from the weekend:

  • Do you believe OPEC is worried about high oil prices?

  • Wal-Mart says fuel costs dampening consumer spending

  • Americans use equity in their homes like an ATM

  • Apple knocks Rio out of the MP3 market

  • Google: not just a search company anymore

Friday, August 26, 2005

"Sometimes we live no particular way but our own." - Jerry Garcia

Morning News of Note:
  • SIRI: While one Howard Stern radio program may seem like quite enough, the self-proclaimed "King of All Media" appears to be getting ready for all Stern, all the time. Sirius Satellite Radio, which will begin employing Stern in January, said yesterday that it will devote two round-the-clock channels to the shock jock's show and other material he'll develop, confirming comments Stern made on his syndicated program this week. (see related comment in "General") (Full Story) Washington Post
  • OVEN: Crunch Time in Fast Food As Chains Go for Toasty Fare, The Technology's the Thing; Subway's Defensive Oven Play Toasted sandwiches are hot. In January, the Subway sandwich chain armed itself with new high-tech ovens and began offering customers nationwide the option of toasting their sandwiches. McDonald's Corp., the world's largest restaurant chain, is testing deli-style sandwiches, some toasted, at about 400 of its 13,600-plus U.S. restaurants. (Full Story) WSJ
  • VoIP: Market for Internet Calling, Once Tiny, Gets Crowded Fast Better Technology, Few Rules Spur Flood of Competition; Pace of Change Is Dizzying Vonage Takes On 'Von-a-bees' In 2002, Vonage Holdings Corp., a tiny start-up with about 50 employees, sparked a revolution in the U.S. phone industry when it began offering an Internet-based telephone service at rates far below those for traditional phone calls. More than 800,000 subscribers signed up, and Vonage, which now counts 1,500 employees, is about to move to new headquarters and is planning an initial public offering that could raise as much as $600 million. But its key selling point -- inexpensive phone service -- is no longer so special (Full Story) WSJ
  • CHS Conf. Call: Co pleased with the same-sales trends for Q3; experiencing low double digit range with the Chico's brand in the high single-digit range in the White House/Black Market brand, again experiencing much stronger same-store sales, up in the mid 40% rate... anticipate that Chico's front-line stores will generate Q3 gross margins in the range of 2004 levels; White House/Black Market's gross margins will continue to make significant improvements... anticipating that overall gross margin decline in Q3 similar to that experienced in Q2; lower gross margin is expected to be principally due to lower gross margins in the outfits division... stock trading at $36.10, -0.97 in after hours.

Market Comments: The market opened lower this morning. Consumer sentiment is down in the latest reading, and Greenspan is out saying that monetary policy is dependant on asset prices. That means that the Fed is targeting the housing market, and will likely continue raising rates until the pace of activity cools more. By then it will probably be too late, and they will soon have to turn and start cutting rates. Guess they never learn.

Thursday, August 25, 2005

Denim glut

Today on, they were debating the issue of a denim glut (or bubble). I have to say that I do not get the sense of any glut. From all of the retail conference calls I have been on, it seems that denim is simply selling very well. And most retailers are saying they would have done better to have more of it in the stores.

If these managements were coming on the calls and saying that they made the wrong move by having too much denim, that it didn't sell well, and that they had to be overly promotional to work down bloated denim inventories, then I would be more worried.

But is it at all possible that maybe the retailers got this one right? Maybe they correctly forecasted that denim would be the bestseller, and stocked ample inventory in anticipation of this. I don't think any investment managers want to entertain this notion, and would rather cling to their denim-glut theories.

I am also from the camp that sees a secular shift towards denim and away from slacks. I can tell you that when I lived in Chicago, I always wore "pants" when I went out to dinners, etc. In L.A., there is basically no restauarant that is too nice to wear denim. More than half of the employees in my building wear denim to work every day. My sense is that this is more of a trend than a fad.

"Men are wise in proportion, not to their experience, but to their capacity for experience." - George Bernard Shaw
  • GM F: Moody's Cuts GM, Ford Debt to Junk Cost Concerns Gain Focus Ahead of UAW Negotiations; Downgrade Follows S&P General Motors Corp. and Ford Motor Co. took another hit as Moody's Investors Service downgraded the corporate debt of both auto companies to junk status, following similar moves by Standard & Poor's Corp. The moves come as the top two U.S. auto makers by market share struggle with intense competition, high costs and the decline in sales of their biggest and most profitable sport-utility vehicles. (Full Story) WSJ
  • GOOG: Google Wants to Be Your Best Friend On Your Computer For most Internet users, Google is synonymous with online search. Millions of people begin every Web session at Google's famous, plain home page. But that's not good enough for the bright young upstarts who run Google. They want Google to be your constant companion even if searching or browsing the Web is the furthest thing from your mind. They are working hard to make Google software a fixture on computer desktops. (Full Story) WSJ
  • INTC: Intel dials up Skype support Intel is investing in VoIP giant Skype to make sure the company's software products are streamlined for Intel's next generation of dual-core processors. Intel senior vice president Pat Gelsinger said Wednesday that the two companies were working together at the research and development level to build what he called "good business-class audio," for voice-over Internet protocol networks. (Full Story) CNET
  • MOT: Motorola intends to give children's phone market a jingle Motorola Inc. plans to make a wireless phone geared for children, the latest attempt to capture a potentially significant and mostly untapped market. While visiting India this week, Motorola Chief Executive Edward Zander told The Associated Press that the company plans to make phones that would let parents monitor their kids' whereabouts and censor obscene comments.Motorola Inc. plans to make a wireless phone geared for children, the latest attempt to capture a potentially significant and mostly untapped market.
  • Short Interest: Nasdaq rptd Aug short interest up 1.3% m/m to 5,821,353,067; SIR 3.6 vs 3.5 in July -- WSJ

Market Comments: The market opens fairly flat this morning. Oil prices are at record highs, which may be beginning to weigh on things. The state of Hawaii is implementing price caps on gasoline, so you know that energy rhetoric is peaking.

The semis are leading the way so far this morning; while energy stocks are down the most. This could be due to profit taking in the sector. Retailers are up nicely as well.


Wednesday, August 24, 2005

Market Wrap

Nasty turnaround day. The market was none too happy with oil getting back above $67. The two indexes I saw that were down more than 1.0% were the brokers (XBD) and the retail index (RLX).

Volume expanded today, making it another distribution day. There has been roughly 4 distribution days over the last 4 weeks. But I still think we get a nice bounce before possibly re-testing any lows.

Sentiment remains bearish. The bull/bear spread in the II survey narrowed; the put/call ratio is hovering near 1.0; and the ISE Sentiment Index finished down at 120. A break in oil sure would help get things going. Or maybe some dovish comments out of the Fed. I'll take anything, you know?

"I am a great believer in luck, and I find the harder I work, the more I have of it." - Thomas Jefferson

Morning News of Note:
  • GOOG: Google's Stock Sale Mystery Is Simply Solved: There Are Buyers Google's decision to issue $4 billion in new stock has been greeted with surprise and stupefaction by the army of analysts who are overpaid to divine happenings within the Googleplex. It is an impenetrable mystery, they say. The company already has nearly $3 billion in cash; why does it need more? (Full Story) WSJ
  • JMDT SNE NOK: Games to Go Cell Phone Platforms May Be the Next Frontier In the Growing Portable Video Game Market You'd be hard-pressed to catch Kevin Bonds, a telecommunications worker who lives in Prince George's County, without some kind of video game in reach at just about any hour of the day. "If I go shopping with my wife and she's shopping for dresses, I find a chair and get my game on," he said. "If she takes me to a party, I take a game with me. It goes without saying." (Full Story) Washington Post
  • AAPL: Apple to buy 40% of Samsung's flash chips-analysts Apple Computer Inc. plans to buy as much as 40 percent of Samsung Electronics Co. Ltd.'s flash memory output in the second half for its new flash-based iPod Mini MP3 player, iSuppli and Deutsche Bank analysts said on Wednesday. Apple , known for its wildly popular iPod digital music player, is expected to introduce a 4-gigabyte version of the iPod Mini that uses NAND flash memory instead of a hard disk drive for the Christmas season. (Full Story) Washington Post
  • Bulls/Bears: Bulls 56.8% vs 57.3% wk ago, Bears 25% vs 22.5% wk ago, Correction 18.2% vs 20.2% wk ago

Market Comments: The market opened slightly weaker this morning, on the soft durable goods report. I liked the pattern of the market being weak early yesterday, but strengthening into the close. I'd like to see the same pattern play out today. The bull/bear figures above continue to point to waning bullish sentiment. The put/call ratio was again above 1.0 yesterday.

I am getting longer in my portfolio, and anticipate at least a short-term rally should develop soon.

long GOOG

Tuesday, August 23, 2005

Stock of the Day

My SOTD is Panera Bread (PNRA). The company reported comp sales +8.9% today, ahead of expectations. That has the stock jumping, on volume that is well above-average. The stock bounced sharply at its 200-day ma, and has also broken above the long downtrend line dating back to June.

Tribe Fever

The Indians have won 5 straight games, and are now in a 3-way tie with the Yankees and Oakland for the wild card. Can you say Tribe Fever?

The trouble with experience...

"The trouble with experience is that by the time you have it, you are too old to take advantage of it." - Jimmy Connors

Morning News of Note:
  • GOOG: Google to Deliver Instant Messages The service may start as early as Wednesday, sources say. The firm will face tough rivals. Watchers of Google Inc. soon will have something new to chat about — and with. Continuing its rapid expansion into new product categories, the Internet search giant plans to launch an instant messaging program called Google Talk as early as Wednesday, according to people familiar with the service. (Full Story) LA Times
  • MOT: Motorola gets FCC approval for iTunes phone According to documents posted to the Federal Motorola is one step closer to launching its long-awaited iTunes phone. Communications Commission's Web site on Saturday, Motorola has received regulatory approval to start selling a cell phone that runs a mobile version of Apple Computer's iTunes software A user manual posted on the FCC site shows that the Motorola E790 can run a cell phone version of iTunes and will contain stereo speakers, removable flash memory and Bluetooth technology for short-range radio communications with other devices. (Full Story) CNET
  • CMCSA: COMCAST'S PITCH Flush from its success winning a National Hockey League television deal, Comcast's Outdoor Life Network is expected to wage an aggressive campaign to win rights to Major League Baseball and National Football League games that are now shown on rival ESPN. Comcast and OLN have their eye on the cable rights to a new package of Thursday and Saturday night NFL games and to a Sunday and Wednesday night baseball package including baseball's ratings-winning home run derby. (Full Story) NY Post
  • TGT: Target-TGT sees August comps near the upper end of their 4%-6% range

Market Comments: Slightly down open this morning. The existing home sales report came in a little weak, and we know how housing-centric this economy has been. RBC raised its estimates for GOOG, calling the weakness a "fantastic buying opportunity".


Monday, August 22, 2005

Feeling Old

Someone in my office asked me if I could go to dinner tonight. "Can't..." I told him, "I'm going to James Taylor." My intern then looked at my quizzically and said, "What's that?"

Huh? You've never heard of James Taylor? He's a singer.

Oh. I don't know him.

I guess I shouldn't have been surprised. After all, he told me he was born in 1983!

Stock of the Day

My SOTD is MicroSystems (MCRS). This fast grower was a big winner in the first half of the year, but has been going thru a correction since about mid-June. Today, it broke through its recent downtrend line, and also broke back above it's overhead 50-day ma.

I started a long position in the stock today, and will add to it on further positive action.

"Experience is the hardest kind of teacher. It gives you the test first and the lesson afterward." - Anonymous

Morning News of Note:
  • GOOG MSFT YHOO: Google Helps Clients Get Personal Customized Web Program May Present Competition For Microsoft, Yahoo Tools Google Inc., which identifies Yahoo Inc. and Microsoft Corp. as its chief foes, is releasing a new piece of software that could challenge both of them. The free program, known as Sidebar, presents consumers with a pane of customized information -- such as weather forecasts, stock quotes, news headlines, text feeds from favorite Web sites, photo slideshows and email alerts -- that sits alongside whatever else the user is viewing. (Full Story) WSJ
  • Housing Bubble: Goldilocks? Not Exactly LIKE AGE, THOSE LONG and variable lags eventually catch up to you. It takes months and even years for monetary policy to affect what happens in the real economy, Milton Friedman taught an entire generation of economics students. And although every central banker on the globe pays lip service to this verity, they still are guided more by backward-looking indicators, such as how many people found jobs last month, than forward-looking ones, such as markets. Quarterbacks know to throw where the receiver will be, not where he is. Central bankers don't get that. (Full Story) BARRONS
  • PG: A Beauty! Proctor & Gamble's Hot New Look THE HISTORY OF big corporate mergers is hardly a study in glory. Most deals have failed to produce the promised benefits, and many have caused lasting damage. In the 20 years through 2000, one study found, mergers destroyed a total of $221 billion of shareholder value. And that was before AOL-Time Warner and HP-Compaq came along. - Procter & Gamble's $57 billion deal for Gillette, slated to close this fall, could prove to be an important exception. (Full Story) BARRONS
  • AAPL: Apple Computer Inc-AAPL to offer 2GB and 4GB iPod shuffles? has either prematurely revealed the existence of 2GB and 4GB iPod shuffles or mistakenly announced a product that doesn't exist. AAPL is planning on releasing new iPod models next month in Paris at an expo. Current iPod shuffle models come in 512MB or 1GB.
  • Short Interest: NYSE short interest for mo end Aug 15 up 2.7% m/m to 8,585,419,209; SIR 6 from 5.8 in July

Market Comments: Wow, the market sure is strong out of the gate this morning. Guess everybody ready my weekly sentiment review over the weekend (just kidding). I'm glad I added some long exposure on Friday, but I would like to add to my positions still.

Semis are strongest so far (+1.2%), while the homies are laggind (+0.2%). It's still way early, so let's see if the market gives back some of these gains or can keep the momentum going.


Sunday, August 21, 2005

Weekly Sentiment Review

As I have written about recently, we are quickly entering a period where bearish sentiment is building. I think that many investors have heard how the Aug. - Oct. timeframe is one of the worst seasonal periods for stocks. As such, traders have piled into bearish bets, added puts to hedge their positions, increased short selling activities, purchased bear market funds, etc.

The pressing of these bets has helped pressure the market recently, but if further downside fails to materialize, I would anticipate that as these bearish bets get unwound it could add some serious upside pressure to the market.

Here is a look at some of the indicators I follow that are pointing to a rally:
  • The bull/bear spread on the AAII survey fell to -11 (29% bulls, 40% bears); this spread hasn't been in negative territory since
  • The bull/bear spread on the survey fell to -26 ( 23%bulls, 49% bears); this is the 3rd consecutive week bears have outnumbered bulls, suggesting extreme bearish sentiment
  • The 10-day CBOE put/call ratio is hovering just under 1.0; this is an elevated level, often a precursor to a rally in the market
  • The Rydex Ursa/Nova ratio is back down to low levels at 0.18; this indicates more money is flowing into the bear market funds
  • The Specialist Short Ratio is all the way down to 0.16; there is enourmous short interest in the market, and short-covering rallies are becoming more and more likely.

Additionally, a look at both the oscillators and stochastics on the indexes shows that the market is short-term oversold. So we have a nice combination of oversold technicals and oversold sentiment (so to speak) that are gelling at the same time.

Market Comments: I will look to use any weakness this week to materially increase my long exposure to the market. I expect at least a tradeable pop in the market, although I cannot rule out at this time that the market will trade lower after that, and possibly put in a lower low. But one step at a time. I am putting together my buy list of strong, market leaders that have merely pulled back due to overall market weakness (as opposed to broken stocks).

Friday, August 19, 2005

"The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint enough to keep from meddling with them while they do it." - Teddy Roosevelt

Morning News of Note:
  • AUO: Report: Taiwan makers to benefit as Wal-Mart and Best Buy schedule US$999 32-inch LCD TV rollout With Wal-Mart and Best Buy scheduled to roll out 32-inch LCD TVs priced at US$999 in the fourth quarter, Taiwan-based TFT LCD panel makers and LCD TV makers will benefit, as overall LCD TV demand should jump at the two retail giants, according to a recent Chinese-language Economic Daily News report, citing sources in the channel. (Full Story) Digitimes
  • BIDU GOOG: Baidu Plays Defense on Voting Rights Dual-Class Share Structure Offers Little Decision Power To Average Holders of Stock Their Web sites are similar. Their names both connote the possibility of unlimited results. But Inc. has done U.S. competitor (and minor stakeholder) Google Inc. one better when it comes to insulating itself from a takeover. Which is another way of saying Baidu's public shareholders have virtually no say in the company's decisions. Shortly before Baidu went public on the Nasdaq Stock Market, the Beijing-based search engine established a dual-class share structure that gave its shareholders -- management, directors, employees and early investors -- stock with 10 times the voting rights of the shares it sold in its U.S. initial public offering this month. (Full Story) WSJ
  • ANR: Alpha Natural Resources, Inc.-ANR a coal company heating up-Business Week: With oil prices still rising, the demand for quality coal is also rising. One large coal producer, ANR, has 64 mines with 500 million tons of proven and probable reserves, worth $30B at current prices. Says Bill Harnisch, CEO of hedge fund Peconic Partners, "ANR is a cheap energy play with a strong earnings-growth kicker."
  • Fund Flows: equity funds rptd inflows $936m, ex etfs $580m; intl equity funds rptd inflows $1.063bln; taxable bond funds rptd inflows $371m, inv grade inflows $384m; money mkt funds rptd inflows $18.539bln -- AMG Data
  • Hedge Funds: PIMCO being sued by investor alleging firm manipulated price of June 10yr Tresury futrures contracts on the CBOT; Raymond Chui claims PIMCO violated Commodity Exchange Act through manipulative conduct that created artificially high prices in futures market; suit filed on Aug 16 in US District Court in Chicago seeks class action status

Market Comments: The market opened slightly higher this morning. ADSK and MRVL reported strong earnings last night, and both stocks are higher so far. Energy stocks are also getting a big pop today, after several days of heavy selling.

long ANR, GOOG

Thursday, August 18, 2005

Stock of the Day

My SOTD today is GameStop (GME). The company reported lackluster earnings this morning, and offered tepid guidance for next quarter as well. But management also said they expect sales to surge later in the year from Sony's PSP handheld system and Microsoft's new Xbox 360 console. They also expect gross margins to improve.

The stock opened down, and traded lower briefly, but then it reversed higher and has been up as much as 10% intraday on surging volume. A break back above its overhead 50-day moving average would be an additional bullish development in the near-term.

My bearish reversal of the day is Citi Trends (CTRN). The hip-hop oriented retailer reported earnings yesterday. This stock also opened lower this morning before reversing higher. But it has since given up all of those gains and then some. This negative double-reversal is a bearish sign.

Although I am considering a long position in this stock at some point, I am going to remain on the sidelines for the time being.

long GME

Morning Look

"If birds of a feather flock together, they don't learn enough." - Robert Half

Morning News of Note:
  • MWD: Morgan Stanley Now Will Keep Discover Unit Morgan Stanley said it will keep its Discover credit-card unit after all, reversing a decision earlier this year to spin it out as a public entity and further confirming that new Chief Executive John Mack wants to take advantage of the firm's multiple businesses rather than be an elite securities-only firm. Morgan Stanley also announced that it will sell its long-struggling aircraft-leasing business, a move it said likely will prompt a $1 billion after-tax charge in the third quarter. (Full Story) WSJ
  • AEOS GPS: Trendy Clothes Spur Back to School Sales STUDENTS ARE JUMPING INTO BLUE JEANS and retro fashions as they prepare to hit the books again, and that should mean more greenbacks for some apparel retailers. Retail stocks have declined recently on signs of weak consumer spending. They tumbled again Tuesday when Wal-Mart lamented that high gasoline prices hurt revenues. But some retailers' shares may be unfairly depressed because of high fuel prices -- just as the summer driving season ends. Plus, the economy is holding up pretty well even as prices at the pump hit new highs. In June, consumer spending rose 0.8% even as crude oil prices topped $60 a barrel for the first time. (Full Story) BARRONS
  • GOOG: Google to Sell $4.2 Bln of Shares a Year After IPO Google Inc., the world's most-used Internet search engine, plans to sell as many as 14.8 million shares in a $4.2 billion transaction a year after its initial public offering. The sale, disclosed today in a regulatory filing, follows a surge in Internet advertising that has fueled demand for the stock. The Mountain View, California-based company's shares have more than tripled since its IPO, and Google's profit jumped fivefold in its year as a public company. (Full Story)
  • NOK AAPL: Nokia-NOK says that AAPL's iTunes will not be included on its N91 phone-Reuters: NOK said that its upcoming N91 multimedia phone will not include AAPL's iTunes, but because of its desigen, programs could be produced for new N-series phones to allow services like iTunes.

Market Comments: The market opens slightly lower this am, on the heels of some weak earnings reports from retailers. LTD, CLE, and BKS all made cautious comments about the retail environment this am.

GME also reported fairly weak results (guidance), but the stock quickly bottomed and is up nicely right now. MDT also reported strong results last night, pushing the stock higher.

Energy stocks continue to be sold off. Boy, people sure are quick to call a top, huh?

long GOOG, MDT

Wednesday, August 17, 2005

Stock of the Day

After a lengthy pullback month-to-date, TRLG is getting a nice pop today on the news that the stock has been approved for listing on the Nasdaq. So far, the stock has traded on the bulleting board. But starting tomorrow, it will trade on the NNM.

While this doesn't change the fundamentals of the company, which by the way are quite good, it should increase interest and awareness of the stock. Hopefully, some more analysts will decide to initiate coverage on it, and that could create more institutional demand for the shares.

TRLG is down due to the overall pullback in the market, the schmeissing that retails stocks have endured lately, and the concerns about the potential for a denim glut at retailers. I think these concerns are priced in, and the stock still offers ample upside as it is still in the early stages of its growth phase.

long TRLG

Morning Look

"Men are apt to prefer a prosperous error to an afflicted truth." - Jeremy Taylor

Morning News of Note:
  • WMT DEO: A Sober Wal-Mart Launches Drive Into Tricky Area: Liquor Retailer Teams With Diageo, Adds Shelf Space for Booze; A Web of State Regulations Some Store Managers Balk Two years ago, Wal-Mart Stores Inc. held a series of meetings with the world's top liquor makers at its alcohol-free headquarters in the middle of a dry county. The subject, say several people who were there: What did Wal-Mart need to do to sell more vodka, whiskey and rum? The results of those meetings are now starting to hit store shelves. In a move partially meant to spur flagging growth at stores open more than a year, Wal-Mart is pushing into hard liquor, one of the rare product categories where the world's largest retailer is very small. (Full Story) WSJ
  • TWX: IN THE PIPELINE Carl Icahn may end up taking credit for the idea, but Time Warner management had been moving toward a complete spin-off of its cable unit long before the financier put the media giant in his crosshairs, The Post has learned. While no final decision has been made, spinning off the entire cable division — as opposed to the small portion the company has announced it will sell — has been gaining currency among Time Warner management (Full Story) NY Post
  • DELL: Heard on the Steet..... 'Dell Effect' Is Under Strain As PC Maker Swells For years, Dell Inc. has touted the "Dell effect," using a build-to-order strategy and high volumes to lower prices on an array of computer products. The plan has worked for 15 years, allowing the Round Rock, Texas, computer maker to steamroll over rivals in markets for personal computers, servers and network storage. The aggressive tactic has allowed Dell to gobble up nearly one-fifth of the world-wide PC market and 34% of the U.S. market. (Full Story) WSJ
  • OPEC Forecasts: Oil cartel OPEC nudged up its forecast for world oil demand growth in 2006 on Wednesday and predicted OPEC supplies would have to offset lower-than-expected output from non-OPEC countries. OPEC now expects world oil demand to grow by 1.57 million barrels per day (bpd) in 2006, an upward revision of 30,000 bpd and little changed from this year's growth rate. In its monthly report, OPEC's Vienna secretariat cited a "slightly more optimistic view of the world economy for the coming year." The United States will lead demand growth within the countries of the Organization for Economic Cooperation and Development, while China will make up about one-fourth of total world oil demand growth in 2006, said OPEC.
  • Bulls/Bears: Bulls 57.3% vs 59.1% wk ago, Bears 22.5% vs 19.3% wk ago, correction 20.2% vs 21.6% wk ago

Market Comments: The market opened flat to slightly higher this am, despite a wosre than expected inflation report. The PPI came in at +1.0% vs. +0.5% est., and the Core PPI came in at +0.4% vs. +0.1% est. Energy prices have a lot to due with these readings, but I think inflation worries will subside in 2006.

Strong earnings from DELL and AMAT are helping the tech sector lead this am. Housing stocks are getting hit the hardest (-1.1%).

long DEO, TWX

Tuesday, August 16, 2005

Nasty Action

I think that is how we have to characterize it. But this is options expiration week, and you typically get at least one nasty decline during expiration weeks. Maybe today was that day.

The SPX declined -1.2% and the Nazz fell -1.4%. Volume levels rose today, so that makes for another distribution day. Volatility levels are starting to perk up, and the CBOE put/call ratio was above 1.0.

After the close, ANF reported weak results and is getting whacked, while HPQ and AMAT reported solid results.

Still keeping my powder dry.

Midday Movers

Here is a partial list of stocks moving on above-average volume:

  • High-volume advancers: ASEI, RAIL, UTHR, BWA, CME, FRGO, DCAI, PSYS, PARL, ESRX

  • High-volume decliners: DKS, AFCO, SJT, DE, TSA, CPTV, JCP, SNS, AEOS, EENC

Market Comments: The market is down a fair amount so far today, on the heels of weak retail earnings (WMT, DKS) as well as DE. Retails stocks are down the most (-2.0%) followed by semis (-1.70%). While those are the headline excuses for todays selloff, I think the big picture remains that this market correction is not yet over. So we have to let it run its course, wait for bearish sentiment to build, and then do our buying. Hope you have some cash on hand--

Morning Look

Morning News of Note:

  • TWX: Icahn Issues Time Warner Challenge Financier Confirms Alliance With Other Investors to Seek Changes at Media Company New York financier Carl Icahn plans to meet with Time Warner Inc. Chairman Richard Parsons tomorrow to discuss Mr. Icahn's push for the media titan to spin off its cable unit and undertake a $20 billion stock buyback. After a week of speculation about his intentions, Mr. Icahn issued a statement confirming he has allied with three other investors to agitate for changes at the media company. He said in the statement that Time Warner's management "has not moved quickly enough" to enhance shareholder value. (Full Story) WSJ
  • TGT WMT: Hungry Target adds food to stores Target Corp. just planted a bigger bull's-eye on the backs of the nation's grocery stores. The Minneapolis-based discount chain said last week it will more than double its food offerings in its new and remodeled general merchandise stores. For the year ending Jan. 29, Target had 1,308 stores. Of those, 136 were Super Target stores, which already include a full-scale supermarket, and 1,172 were Target general merchandise stores. (Full Story) Chicago Tribune
  • AAPL: Two products of Apple Computer are showing signs this month that they may soon be labeled "end-of-life" with no future availability. Over the weekend resellers reported that Apple had canceled individual backorders for its single-buttoned wired optical Apple Mouse, which currently ships standard with Macintosh desktop systems and was also available for purchase separately. The $29 mouse also recently disappeared from Apple's online stores, making the new $49 Mighty Mouse the cheapest Apple mouse available for direct order. (Full Story) Apple Insider
  • TGT: Target expects Aug comps to be in line with planned 4-6% increase range (57.15 +0.57)

Market Comments: The market is opening slightly lower on weak WMT results, and the statement that they will no longer release weekly sales forecasts. Bummer. I really liked these weekly looks into consumer spending.

CPI came in at +0.5% (vs. +0.4% consensus); core CPI came in at +0.1% vs. +0.2% cons.

long TWX, WMT

Monday, August 15, 2005

Sentiment Review

Despite the fact that the market hit a new high only 2 weeks ago, and the subsequent pullback has been relatively shallow, I am already seeing signs of building bearish sentiment.

It isn't near peak levels, but it is starting to grow. If the market pulls back further into the late August/early September time frame, I could envision a scenario under which bearish sentiment rises further, and helps solidify a nice trading bottom. Here are some of the signs I am watching:
  • The bull/bear spread on the AAII survey fell to +11 (40% bulls, 29% bears), and could move back into negative territory (like in April/May)
  • The bull/bear spread on the RealMoney survey fell to -30 (21% bulls, 51% bears), due to a huge spike in bearish sentiment
  • The 10-day CBOE put/call ratio is back at 0.99, an elevated level (tradeable bottoms often coincide with readings above 1.00)
  • The Specialist Short ratio is still at extreme low levels (0.18), indicating there is still a lot of shorting taking place by joe public

It is too early to try to time a near-term bottom at this point, but things are beginning to take shape. I would not be surprised to see some sort of failed rally attempt, followed by an additional selloff, to bring more bears out of hiding. I would then look to add to recent market leaders that should continue to be strong into year-end.

Midday Movers

Here is a partial list of stocks moving on above-average volume:
  • High-volume advancers: LUFK, CPTV, CUTR, AAPL, TALX, VIVO, DXPE, WSO, HOLX, ADSK

  • High-volume decliners: VLCCF, DSL, ARLP. GDP, WTI, IPII, DWSN, BDC, EZPW, ITRI

Market Comments: The market found a low mid-morning, and has bounced back into positive territory. Semis are leading the way (+1.0%), while energy stocks are lagging (-0.9%). I don't see a lot of conviction out there, and think the market probably closes up slightly.

Housing Bubblets

The 2Q NAR existing home sales report came out this am, and shows that some of the overheated real estate markets showed no signs of cooling. Among the areas that I would note as overheated are:
  • Phoenix: +47.0% yr/yr
  • Ft. Myers: +45.2% yr/yr
  • there were also several other cities in South Florida that showed 30%+ growth

These are the areas about which I am most concerned. I was heartened to see that my local market, Los Angeles, grew by a more modest +8.3%, after several quarters of +20% growth. I think it is feasable that this market, given its low levels of supply, could experience a soft landing. I am far less sanguine about those other markets.

Morning Look

"Few men have the natural strength to honor a friend's success without envy." - Aeschylus

Morning News of Note:
  • VOD: Softer Cell In Mobile Phones, Older Users Say, More Is Less All the Features Just Confuse, They Tell Vodafone, So It Tries Making a Simple One Pushback From Young Staffers At a time when cellphones are letting users do more tricks, from video calling to downloading digital music, one of the latest models from Vodafone Group PLC has no camera, no browser and hardly any icons. Instead of being sleeker and cooler than ever, the phone is large and ordinary-looking. What it is, though, is easy to use, and if Vodafone is right, the market will love it. That's because of who its market is: people getting up in years. (Full Story)
  • FOXH: Doctors Take Stock, Supply Data Concerns Over Conflict of Interest: Some Physicians Evaluating FoxHollow Device Own Options Some doctors helping evaluate the effectiveness of an increasingly popular device for clearing clogged arteries own stock and options in the company that makes it, regulatory filings show. FoxHollow Technologies Inc.'s SilverHawk catheter is one of the hottest selling new medical devices on the market and has sent the company's stock surging since it went public in October. As of the end of last year, 12 doctors were supplying information about the catheter's effectiveness to a registry the company uses to evaluate the SilverHawk -- its only product -- and to promote it to other doctors. (Full Story) WSJ
  • COF: What's in Capital One's Wallet? Firm Rose Quickly By Opening Its Funds and Broadening Its Services Richard D. Fairbank may be the person most responsible for the boom in consumer debt. Teaser rates. Balance-transfer offers. Blizzards of direct-mail pitches. Credit terms tailored toward almost anyone, regardless of financial status. All those ideas, common now not only in the credit card business, but also in home mortgages and other forms of consumer lending, were first put to use at the company Fairbank co-founded, McLean-based Capital One Financial Corp. (Full Story) Washington Post
  • INTC: Intel Corp.-INTC gearing up to launch new power saving processor-FT: Next week, semiconductor company INTC will introduce a new chip architecture that will play an important role for years to come in the computer industry. The new chip architecture, INTC's first in five years, will be launched in the second half of 2006, coinciding with MSFT's new Vista operating system. The new architecture will save power and add a new feature which will allow computers to turn on without the long "boot" process. The new chips, which have not yet been named, will succeed INTC's Pentium 4 and Pentium M.
  • TWX: Icahn puts pressure on Time Warner - Financial Times (18.24 ) The Financial Times reports that Carl Icahn has asked Dick Parsons, Chmn and CEO of Time Warner, to increase share buybacks to $20 bn and to spin off a larger chunk of the group's cable business. People briefed on the plans said Mr Icahn told Mr Parsons in a telephone call last Fri that he and 3 other hedge fund investors Franklin Mutual, Jana Partners and SAC Capital had accumulated a $2.2 bn stake in Time Warner. Details of the call and the investor group are expected to be made public today following filings with the SEC on Fri.

Market Comments: The market opens slightly lower this am, and the newsflow is relatively quiet. SYY reported in-line results, and the stock is getting a bit of a pop. AAPL is spiking to new highs, despite the heavy tape.

My market exposure is relatively light, but I might look to get longer for a trade on any further pullback. Sentiment is nearing oversold readings, though we are not there yet. I'll be back with my weekly sentiment review later this morning.


Saturday, August 13, 2005

This and That

Here are some miscellaneous links of interest from the weekend:

  • More talk of a peak in housing

  • Capacity constraints push oil prices up 50% ytd to $67

  • Oil does not seem to be denting consumer spending yet

  • Flat-panel prices are coming down (should help spur holiday sales)

  • Ouch. Bad news for the Bears (and I'm not talking about the market)

  • What's with the Sopranos schedule? I'd boycott that show if I didn't like it so much

Friday, August 12, 2005

Midday Movers

Here is a partial list of stocks moving on above-average volume:

  • High-volume advancers: ASEI, NVDA, GMXR, CPTV, INT, RBC, WGR, NTES, ASFI, SJT

  • High-volume decliners: RRGB, USAK, DELL, CREE, JMDT, FS, IPII, DIGE, MOVI, SNDA

Market Comments: The market decline has picked up some steam, with the SPX -0.9% and the Nazz -1.3% so far. The fact that oil is near $67 is clearly a negative, but it was also a negative yesterday when the market rallied into the close. Go figure. Traders like to head out early on Summer Fridays, so I doubt we get the same type of late-day rally today. I'm just sitting on my hands for now.

Morning Look

"Enthusiasm is the greatest asset in the world. It beats money and power and influence. It is no more or less than faith in action." - Henry Chester

Morning News of Note:
  • TGT: And What Would Thurber Say? A Single-Sponsor New Yorker FOR the first time in the 80-year history of The New Yorker magazine, a single advertiser will sponsor an entire issue. The Aug. 22 issue of The New Yorker, due out Monday, will carry 17 or 18 advertising pages, all brought to you by the Target discount store chain owned by the Target Corporation. The Target ads will even supplant the mini-ads from mail-order marketers that typically fill small spaces in the back of the magazine. (Full Story) NY Times
  • AAPL MSFT: IT'S APPLE VS. M'SFT IN IPOD PATENT SPAT Due to a fumbled race to the patent office, Apple could be forced to pay its arch-enemy Microsoft an embarrassing royalty on each iPod Apple sells. The awkward dilemma developed because Microsoft was faster on its feet — by at least five months — to file applications years ago to patent the technology that runs iPods. (Full Story) NY Post
  • EBAY: In a Challenging China Market, EBay Confronts a Big New Rival Yahoo Backs a Local Firm; An Online-Auction Duel Stirs Memories of Japan Mr. Ma's Plans for Alibaba Internet auctioneer eBay Inc. faces tough challenges in China that just got much tougher. As in so many industries, China offers Internet companies a fast-growing but tricky and immature market. That would be daunting enough for eBay, which is one of China's biggest online auction companies. But now it faces a savvy local rival, Corp., which as of yesterday has a lot more heft. (Full Story) WSJ
  • ANR: Alpha Natural Res-ANR shares may still have some steam left in them-Business Week: Bill Harnisch from Peconic Partners believes that shares of ANR have a lot more steam left in them. Peconic sees ANR as "a cheap energy play with a strong earnings-growth kicker." The fund owns 3M shares & Harnisch believes that shares could go to $40 in a year.
  • JMDT: Jamdat Mobile on Conf Call (29.49 +0.04): Co says Blue Lava contribution for Q1 would have been approx 'a couple of hundred thousand dollars'... believes THQI biggest competitor with Cingular (notes Star Wars game); beyond that do not have specific information on other companies... co sees quality of publishers increasing; seeing competition from THQI and ERTS, believes this is a validation of the market; co is not surprised by anything they have seen in the marketplace and believe overall it is good for the market place... Stock is trading at $23.33, -6.16 in after hours.

Market Comments: The market opens down this am, on weak earnings last night from DELL, high oil, and profit taking. Check out RRGB and JMDT if you want to see the definition of "nasty". This is why I always urge taking partial profits before an earnings report (if you have them) or putting on some kind of hedge. Avoiding big declines is paramount to outperforming.

All of the energy royalty trusts are on fire, and with oil over $65, even a big pullback doesn't seem like it is going to crimp cash flow at these companies for a while.

Thursday, August 11, 2005

Late-day Rally

The market rallied hard into the close, finishing near the highs of the day. But volume ran below yesterday's levels. As such, I think it lacked real conviction, and could have been a wave of late-day short covering. I guess we'll see, as follow-thru will be the key.

I have a whole list of former leaders, whose charts show them all to be rolling over. This is another reason I don't believe this correction has run its course.

DELL reported after the close, and guided revenues lower for next quarter. That has knocked the stock down a couple bucks in after-hours trading. Likewise, JMDT lowered guidance and is getting whacked.

Midday Movers

Here is a partial list of stocks moving on above-average volume:
  • High-volume advancers: RBC, GMXR, BECN, INT, CPTV, BRG, VTS, HIBB, AIT, EPAY

  • High-volume decliners: WMS, FS, NRGY, AAP, USTR, URBN, STST, CUK, RARE, STNR

Market Comments: Another big fade. The SPX was up about 8 points this morning, but has since given back nearly all of those gains. That type of action really saps the buying power of investors, as all of those early buyers finish the day underwater. Still too early to start buying in least, that's how I see it.

Morning Look

"Experience and enthusiasm are tow fine business attributes seldom found in one individual." - William Feather

Morning News of Note:
  • UCL CVX: When Cnooc, the Chinese government-owned oil company, dropped its bid to buy Unocal this month, it said political opposition in Washington had scuttled the plan. The question oil companies now face is whether they might suffer similar political retribution in their own dealings with foreign governments. The fate of Unocal was finally settled yesterday when a majority of the company's shareholders approved a takeover offer from Chevron worth about $18 billion. The battle has left a bitter taste among many in the oil and gas industry because of the hostility displayed by lawmakers and the consequences this might have for United States oil companies worldwide. (Full Story) NY Times
  • TWX: Heard on the Street... Icahn's Big Ideas For Time Warner Are a Tough Sell Wall Street isn't buying Carl Icahn's plan to turn around Time Warner Inc. Word that the New York financier -- famous for putting pressure on corporate chieftains to increase shareholder returns -- was focusing on Time Warner as his next target boosted Time Warner shares earlier this week. But yesterday, Time Warner's share price fell on widespread skepticism about Mr. Icahn's plans. In 4 p.m. composite trading on the New York Stock Exchange, Time Warner shares were down 30 cents to $18.24. (Full Story) WSJ
  • YHOO: Yahoo to Pay $1 Billion for Stake in China's Alibaba Yahoo! Inc. agreed to pay $1 billion in cash for a 40 percent stake in, China's biggest online retailer, to catch up with EBay Inc. in the world's second- largest Internet market. Yahoo, owner of the world's most-visited Web site, will become Alibaba's biggest investor, the companies said in a joint statement today. Alibaba will take over Sunnyvale, California- based Yahoo's China operations, with Jack Ma, chief executive of the Chinese company, leading the new venture. (Full Story) Bloomberg
  • YUM: YUM! Brands reports period 8 same store sales (50.71 ) Co reports blended U.S comps +5% vs +3.04% consensus; reports KFC +5% vs +4.5% consensus; reports Pizza Hut -2% vs -1.12% consensus; reports Taco Bell +9% vs +6.21% consensus; reports International +5% vs +6.1% consensus; reports China sales +17% vs +12.1% consensus. Sales results for Period 9 (the four-week period ending September 3, 2005, for the U.S. businesses) will be released Thursday, September 8, 2005, before the market opens.

Market Comments: The market opens up a bit this morning. Considering yesterday's big fade, I would have preferred to see the market open down, and then reverse higher into the close. Energy stocks are still jamming, with oil hovering around $65. T. Boone Pickens was on yesterday saying we'll see $75 oil within a year. Ouch. I'll be back with my top pick in the energy patch later today.

long TWX

Wednesday, August 10, 2005

Nasty Action

Today's action was nasty. No other way to put it. The markets opened strong and rallied for a few hours. But then they began to rollover, and by the end of the day, all of the major indexes finished in the red. I think oil hitting $65 could have been a big factor, as that is an eye-popping number. But remember, I also said yesterday that I thought the market was still vulnerable.

Volume levels rose for the day, making it a distribution day. For the S&P, I call this a high-volume downside reversal, which is pretty bearish. On the Nazz, we got a high-volume LROD (large-range outside day), which is more bearish. This occurs when the index rises above the previous day's high but closes below the previous day's low. Thus, on the chart, the top and bottom of today's line fall outside of the top and bottom of yesterday's line. (click on chart)

So what does it all mean? At this point, not too much. Just that the correction has more to go. Patient investors will monitor the day-to-day action, but not make any big bets until a better set-up presents itself.

Midday Movers

Here is a partial list of stocks moving on above-average volume:

  • High-volume advancers: CKCM, GMXR, GTRC, CKH, NTGR, WTI, EME, LEN, BBD, BRY

  • High-volume decliners: NVL, ENH, NIHD, USTR, CSCO, AVT, GB, SNDA, KMP, PNRA

Market Comments: The market is rolling over as I write this. The SPX has given back more than half its early gains, while the Nazz has given up all of its gains and moved into negative territory. Still a few hours to go, so let's see how the market closes before I make a call on the near-term market direction.

Morning Look

"True enjoyment comes from activity of the mind and exercise of the body; the two are ever united." - Karl Wilhelm Humboldt

Morning News of Note:
  • TWX: Icahn Tries to Form a Team to Take On Time Warner Carl C. Icahn, who has made a career out of agitating for change at corporations, has set his sights on an incredibly large new target: Time Warner. Mr. Icahn has been putting out feelers over the last week to other large Time Warner shareholders and hedge funds about forming a faction with enough leverage to press the board to spin off Time Warner Cable, and possibly other divisions, according to people who have been briefed on Mr. Icahn's pitch. (Full Story) NY Times
  • WFMI: Think Google, With Less Hype: The Case for Whole Foods Market One of the things I most enjoy about investing is that it encourages you to be an optimist, looking for opportunities where others might see only peril and gloom. When the "news" is so often bad, it is a welcome change to seek out and invest in something positive. These thoughts were on my mind this week as I passed through the Whole Foods Market, which now has outlets in New York City just steps from both my office and my apartment. (Full Story) WSJ
  • CSCO: Cisco Shares Fall as Sales Forecast Misses Estimates Shares of Cisco Systems Inc., the world's largest maker of equipment that links computers, declined in Europe after the company forecast sales this quarter that may miss analysts' estimates. The shares fell as much as 98 cents, or 5 percent, to the equivalent of $18.63 in German trading from the close of $19.61 in the U.S. yesterday. The stock traded at $18.92 as of 10:15 a.m. in Frankfurt. San Jose, California-based Cisco yesterday reported an 11 percent rise in fourth-quarter revenue and said sales growth will slow to 10 percent this quarter. (Full Story) Bloomberg
  • REIT Peak: REIT Deals Stay Hot But Shares May Be Peaking A spate of recent real-estate deal news, including two rare unsolicited offers, has bankers and analysts worried that shares in real-estate investment trusts may have peaked. The three-day, 7% swoon suffered by REIT stocks on the Dow Jones REIT Equity Index beginning last Thursday added to concerns that rising interest rates would end investors' love affair with real-estate companies. "You tend to see a lot of merger activity at the tops and bottoms of market cycles," says Ross Nussbaum, a Banc of America Securities REIT analyst (Full Story) WSJ
  • Bulls/Bears: Bulls 59.1% vs 59.4% wk ago, Bears 19.3% vs 19.1%, Correction 21.6% vs 20.2%

Market Comments: The market is surging higher out of the gate. I prefer markets that start out weak in the morning, and close at their highs. Yesterday, the market peaked relatively early in the day, and gave back roughly half the gains by the close. We'll have to wait and see if the late day fade pattern surfaces again.

CSCO is down $1 (-5%) after reporting that sales growth may be a little soft going forward. Retailers and housing stocks look strongest so far. Happy trading.

long TWX

Tuesday, August 09, 2005

That's a Wrap

The market staged a nice bounce today, but I would not exactly call it impressive. Breadth and volume were only moderate, and the SPX was not able to close above yesterday's highs. So I don't think it is the resumption of the recent uptrend.

The stochastics have moved back down into short-term oversold territory, but they have not been joined by the oscillators yet. I like to wait for more of these indicators to line-up before getting bullish for a trade.

I would not be surprised to see the market continue higher for another day or two, but beyond that I think there is more work to be done before this consolidation is over.

Midday Movers

Here is a partial list of stocks moving on above-average volume:

  • Stocks advancing on high volume: OLGR, RL, HANS, BRG, AACC, EME, ISRG, TRP, SPF, ARLP

  • Stocks declining on high volume: CRYP, FOSL, VSTA, CKCM, FLR, FARO, NTLI, AXS, PTV, FOE

Market Comments: The market rallied big after the open, and has hovered around those levels for the last couple of hours. Now we sit and wait for the Fed, to see if they alter their standard language at all. Seems like a silly game, doesn't it? Then again, I don't make the rules.

Morning Look

"All of the animals except man know that the principal business of life is to enjoy it." - Samual Butler

Morning News of Note: (I am having trouble getting my normal news feed, so today's news will look different)
  • HANS reported very strong earnings this am ($1.26 vs. $0.90 est.); sales rose 85%, and gross margins rose to 52.6%. The stock also split 2-for-1 today.
  • US productivity was up a respectable +2.2% last quarter (vs. +2.0% consensus)
  • The FOMC meets today, and is expected to hike rates for a 10th consecutive time to 3.50%. The market seems to be pricing in a 4.0% fed funds rate by year-end, as the Fed keeps its foot on the brakes due to an accelerating economy.
  • The NAR is tempering its forecast, saying that they expect the housing market to cool from current levles. They even went as far as to say that now is a better time to sell, while buyers should hold off.

Market Comments: The market opens higher this am, but I wouldn't make too much of the action. The Fed will raise rates another 25 bps today, and then we will see how the market reacts. While it seems silly to have to wait, considering everyone in the world knows what the Fed is going to do, the important action will be how the market closes today.

After a strong run, energy stocks are pulling back in early trade, despite oil nearing $64. Homebuilders and retailers are bouncing. I think it will be interesting to watch the yield plays (REITs, Utes, etc), considering how hard they have been sold over the last few days.

Monday, August 08, 2005

Morning Look

"The world belongs to the energetic." - Ralph Waldo Emerson

Morning News of Note:
  • REITS: Pop! The Other Real-Estate Bubble THE NATIONWIDE INFATUATION with property has spilled over into the stock market, where shares of real-estate investment trusts have soared, despite spotty operating results and higher interest rates. The run-up in REIT shares, which have doubled since early 2003, has raised concern on Wall Street that a bubble could be forming in the $300 billion sector. "Our view is that valuations are in uncharted territory, and the group is very susceptible to a correction," says Jonathan Litt, the REIT analyst at Smith Barney. What's the downside? Litt says that shares of real-estate investment trusts could fall more than 10%. This year, the major REIT indexes are up about 10% (including dividends) after 30%-plus returns in both 2003 and 2004. (Full Story) BARRONS
  • TWX: AOL making wireless move America Online will announce today that it's accelerating its move into cell phone services through the acquisition of a software company, Wildseed, which will be part of a new unit called the AOL Wireless Group. "We believe that wireless is one of the biggest places for AOL to play in," says AOL Wireless General Manager Craig Eisler. The deal with privately held Wildseed "enables us to offer new products like instant messaging for phones, and great photo and music experiences for phones." (Full Story) USA Today
  • BIDU: Sees IPO Pop, But Some Fear a Burst Bubble The initial public offering of shares in Chinese Web search engine Inc. seemed to have it all: exposure to China's booming consumer sector, a pure play on a hot industry, and a chance to own what is commonly referred to as the Chinese Google. The result was the best U.S. stock debut in more than five years, according to Thomson Financial. Baidu's American depositary shares closed at $122.54 on Friday, rising 354% on the Nasdaq Stock Market from its offering price, the biggest first-day gain since telecom-equipment provider Finisar Corp. jumped 357% in November 1999 -- during the final chaotic months of the Internet stock-market boom. (Full Story) WSJ
  • C: Citigroup-C planning aggressive bank acquisitions-FT: C is planning an aggressive acquisition comapaign in growth markets including Asia, Latin America and eastern Europe after the regulatory ban preventing the company from making large acquisitions is lifted, according to CEO Chuck Prince. "I would expect a lot more transactions like [South Korean bank] KorAm where we step up from 2 or 3 per cent market share to something like 10 per cent market share," he said
  • CSCO NOK: Nokia shares gain on report of Cisco interest -- Reuters (15.94 ) Nokia shares opened more than 2 percent higher on the Helsinki bourse on Monday following a newspaper report that Cisco Systems (CSCO) is considering making a bid for the top mobile handset maker. The Business newspaper reported on Sunday, without revealing its sources, that Cisco is eyeing NOK in a bid to gain its wireless infrastructure technology. Both Cisco and Nokia declined to comment on the London newspaper report.

Market Comments: The market opens higher this am, and BIDU is off to the races again. Don't chase this one. There is also a rumor that CSCO wants to buy NOK, but I don't believe it.

Friday was a pretty big distribution day, the first one in a while. I think the consolidation phase has started, and doubt the market will make any new highs in the near-term. I have trimmed my overall market exposure and will look to play the trading ranges for the time being.

long C, TWX

Saturday, August 06, 2005

This and That

Here are some links of interest from the weekend:

  • Amazon preparing to launch digital tunes

  • Preparing for Greeny on Tuesday

  • Wal-mart still expects 3-5% sales growth

  • Jason Gore shoots a 59

  • Did Paula rob the cradle?

Friday, August 05, 2005

Swamped in Hollywood

That title was actually a play on the title of a song by Concrete Blonde. How many of you picked up on that?

Anyway, my sincere apologies for my lack of posts today. To say that I was swamped with meetings would be an understatement. I promise to make it up to you guys with lots of posts next week. Also, check this weekend for my weekly sentiment review as well as some 'This and That'.

Have a great weekend--

"Whatever your work is, dignify it with your best thought and effort." - Esther Baldwin York

Morning News of Note:
  • GE: Spielberg Link Boosts Value of DreamWorks How much is Steven Spielberg worth? That's the billion-dollar question for NBC Universal as it negotiates to buy DreamWorks SKG. NBC Universal, the entertainment unit of General Electric Co., has entered a two-month period of exclusive discussions in its effort to acquire DreamWorks. The deal could value the movie studio co-founded a decade ago by Mr. Spielberg at considerably north of $1 billion, people familiar with the matter have said. (Full Story) WSJ
  • MO RAI: Seniors Group Sues Big Tobacco To Recover Money for Medicare A conservative seniors group filed suit against big U.S. tobacco companies, seeking to recover billions of dollars spent on smoking-related diseases by Medicare, the federal health-insurance program for the elderly. The case relies on a little-known but recently strengthened provision of Medicare law that allows someone to sue on behalf of Medicare when it pays medical expenses that another party had a legal obligation to cover -- for example, when a corporate health plan has agreed to cover the expenses, or when a business or other party injured the Medicare beneficiary and is liable. (Full Story) WSJ
  • July Payrolls: U.S. employers added 207,000 workers to their payrolls in July, the most in three months and enough to keep incomes rising and consumers spending, economists said in advance of a government report today. The figure is based on the median estimate of 73 economists surveyed by Bloomberg News. The forecast compares with 146,000 jobs added in June and is about the same as this year's average. (Full Story) Bloomberg
  • PG: Procter & Gamble-PG to auction Spinbrush and PG will be selling its Spinbrush brand as a concession to win approval with the European Commission to acquire G. Sources say the company will also sell Rembrandt, a brand owned by G, to win Federal Trade Commission approval for the G acquisition. MER is advising PG on its divestitures.

Market Comments: The market opens down this am, despite a stronger than expected payrolls report (207k vs. 180k consensus). Oil and bond yields are both higher this morning, which is likely pressuring stocks, in addition to more profit taking after the very strong run we've had.

So far, the homebuilders and select retail stocks look to be getting sold the hardest. But it's still early-- way early.

long GE, MO, PG