Friday, March 31, 2006

Stopped Out on SiRF

Yesterday, I was stopped out of my position in SiRF Technology (Nasdaq:SIRF). The stock sold off on very high volume, due to rumors that one of its largest customers in Asia is experiencing soft sales, and broke below its 50-day average in the process.

I don't know if those rumors are true or not, but the action in the stock was pretty bearish. Given the high valuation that SIRF trades at, it could experience a correction at any time. I elected to to stick with a tight 10% stop-loss, which was triggered. I plan to keep my eye on the stock to see if and how it corrects, with an eye toward repurchasing at some point.

click here for larger image

Morning News of Note:
  • BBY HPQ: U.S. TV Maker Wins a Shelf At Best Buy Electronics retailer Best Buy Co. is set to start selling flat-panel television sets from computer giant Hewlett-Packard Co., marking the return, after more than a decade, of TVs from a major U.S. company to a national retailer's shelves. H-P says components are being sourced from several suppliers and the sets assembled in Asia; still the deal marks a new approach to television marketing from a U.S. manufacturer. (Full Story) WSJ
  • GOOG: Google Puts Marketers on Map In a Reach for Local Ad Dollars Google Inc. began letting advertisers buy ads displayed on specific geographic locations on its popular online mapping and local search service. The move further extends the reach of its ad network and potentially lets Google tap into local marketing dollars that traditionally go to phone directories and other media. (Full Story) WSJ
  • CVC CMCSA TWX: Comcast, Time Warner back Cablevision DVR plan Comcast and Time Warner Cable on Thursday threw their support behind fellow cable operator Cablevision's plan to offer a digital video recording service that can replace DVR boxes. The proposed new service will allow cable TV subscribers to record programs on Cablevision Systems' network servers, doing away with the need for digital video recorder boxes made by companies like TiVo and Cisco Systems' Scientific-Atlanta. (Full Story) CNET
  • SGP PYX CHTT JNJ: SUNSCREEN CLAIMS FALSE, SUIT SAYS Sun worshippers slathering on sunscreen lotion are using worthless products that won't protect them against skin cancer, says a new lawsuit slamming the top five sunscreen makers. The suit charges that the makers of such popular sunscreens as Coppertone, Hawaiian Tropic, Neutrogena and Banana Boat have "lied about the effectiveness of their products in blocking ultraviolet sun rays." (Full Story) NY Post
  • Mad Money Summary: Jim Cramer says if you want to show off with some "bling bling," you should invest in luxury-goods maker Movado (MOV). Their business is "on fire" because accessories are hot. Then Cramer discussed the mining and construction sector, pointing out that if you listened to him and bought Manitowoc (MTW) last month, you would have made mad money. He says it isn't too late to make money in this sector. Look at H&E Equipment Services (HEES). Then Cramer discussed five "fast and furious stocks," Rackable (RACK), Akamai (AKAM), F5 Networks (FFIV), Citrix (CTXS), and Network Appliancee (NTAP), which are good momentum plays. In the Lightning Round, Cramer was bullish on Cedar Fair (FUN), Ceradyne (CRDN), Hewlet-Packard (HPQ), Cardinal Health (CAH), UnitedHealth (UNH), Agilent (A), AK Steel (AKS), US Steel (X), Oregon Steel (OS), Wheeling-Pittsburgh (WPSC), International Game Tech (IGT), Vulcan Materials (VMC), Martin Marietta Materials (MLM), Eagle Materials (EXP), Brocade (BRCD), Conexant (CNXT), Legg Mason (LM), Trinity Industries (TRN), and BHP Billiton (BHP), and was bearish on Six Flags (PKS), Tidewater (TDW), Applied Materials (AMAT), Amkor Technology (AMKR), Montpelier Re (MRH), Mikon (PGIC), Encysive (ENCY), Exploration Co. of Delaware (TXCO), and Freightcar America (RAIL).

Market Comments: The market is slightly higher in early trading. News out of Delphi to void its union contracts is putting pressure on GM. The PCE deflator showed a modest rise, while the Chicago PMI was stronger than expected. That said, bond yields are down slightly to 4.84%.

Energy stocks are down across the board, likely due to profit taking after a nice little run. Semis are down, and brokers are higher again. The rest of the sectors are mixed for the most part.

long GOOG, JNJ

Quote of the Day

"I almost had a psychic girlfriend, but she left me before we met." ~ Steven Wright

Thursday, March 30, 2006

Stocks Hold Yesterday's Gains

Most stocks I follow did a pretty good job of holding on to yesterday's gains. The COMP finished higher today, while the SPX was off slightly. Breadth was solid, not so much in the A/D line, but the Hi/Lo index hit a 2-week high on the NYSE and a 4-week high on the Nazz.

There were also some surprising numbers on the sentiment front. The ISE Sentiment Index fell to 114 today. That is an extremely low level, and one that is far more indicative of pessimism than rampant bullishness. Also, the bull/bear spread on the AAII fell this week. It is basically the exact opposite of what I would have expected if you told me the Nasdaq was breaking out to new highs.

This leads me to believe that any near-term weakness will likely by mild. Tomorrow is quarter end, so there will likely be a bid underneath the market. Next week we will see if the bulls can continue to hold court.

Standout Stocks

Here are some stocks making notable moves today:
  • NCTY - extending huge run to new highs; looks vulnerable
  • WTI - breaking out to new highs; strong energy group
  • LIFC - high volume break above 50-day
  • AAPL - day 2 of recovery rally; rumors of iPhone
  • GLG - breaks out to new highs along with gold
  • RECN - gaps lower on weak Q3
  • MDTH - gaps below 50-day on rising volume
  • WHR - gives back some of yesterday's Maytag gain
  • MFLX - high volume drop; acquisition concerns
  • SIRF - breaks below 50-day; rumors of weak sales at large customer

long AAPL

S&P 500 Nearing New Highs

Morning News of Note:
  • NDAQ: Nasdaq Abandons $4.2 Billion Takeover Offer for LSE Nasdaq Stock Market Inc. withdrew a 2.4 billion-pound ($4.2 billion) bid for London Stock Exchange Plc, abandoning an attempt to create the first transatlantic stock market. Shares of LSE slumped the most in more than 4 1/2 years. Nasdaq, the largest U.S. electronic equity market, pulled its offer of 950 pence a share, the New York-based company said in a statement today. (Full Story) Bloomberg
  • GM: GM Moves Closer to Selling 51% Stake in GMAC General Motors Corp. yesterday was moving closer to striking a deal to sell a majority stake in its finance arm, General Motors Acceptance Corp., to an investor group led by Cerberus Capital Management, people familiar with the matter said. A transaction would be a milestone for GM, which would be giving up control of the 87-year-old unit at a time when it faces enormous financial stress. (Full Story) WSJ
  • LVS: Las Vegas Sands Corp. announced the company has formally submitted its proposal to the Singapore Government to build an integrated resort at Marina Bay in Singapore. Demonstrating its long-term commitment to Singapore's tourism future, LVS is proposing to invest $3.6 billion to develop The Marina Bay Sands, making it possibly the most expensive integrated resort ever proposed. LVS is also committed to opening 100 percent of the Gross Floor Area of The Marina Bay Sands in 2009. Its proposal includes plans for 2,500 hotel rooms, 1.2 million square feet of flexible meetings, incentive, convention and exhibition space, one million square feet of retail space, three large entertainment venues and a Paiza Club, LVS' successful premium player venue
  • TRID GNSS: Samsung raised forecast for LCD industry shipments-Bloomberg. To reflect higher-than-expected demand for TVs, LCD shipments will rise to 265 million units this year, above its previous forecast of 256M units. Samuung said LCD TV shipments worldwide will rise 58%to 44M units this year
  • Mad Money Summary: Cramer opened his show last night by suggesting Roper Industries (ROP), a diversified industrial company that makes water meters, pumps and measuring instruments. The company was added to the S&P MidCap 400. Cramer researched the last 19 stocks that were added to this index and found they produced an average return of 34.66%. Cramer then told a caller he recommends Aqua America (WTR) as a pure play on water. Then Cramer discussed pain medication, specifically the drug he believes is the next OxyContin. OxyMorphene, which is made by Penwest Pharmaceuticals (PPCO), could be a potential blockbuster, he said. In the Lightning Round, Cramer was bullish on Headwaters (HW), KFx (KFX), Radiant Systems (RADS), Websense (WBSN), Symantec (SYMC), Radvision (RVSN), Sanofi-Aventis (SNY), Novartis (NVS), Matsushita Electric Industrial (MC), Rackable Systems (RACK), Sony (SNE), Western Digital (WDC), Seagate Technology (STX), Amgen (AMGN), XM Satellite Radio (XMSR), Ciena (CIEN), JDSU (JDSU), Conexant Systems (CNXT), Bookham (BKHM), Finisar (FNSR), PepsiCo (PEP), Qualcomm (QCOM), Level 3 Communications (LVLT), Dynamic Materials (BOOM), United Tech (UTX), Broadcom (BRCM), Marvell (MRVL) and Apple (AAPL) and was bearish on Google (GOOG), Secure Computing (SCUR) and Brigham Exploration (BEXP).

Market Comments: The market is seeing some early strength in the first hour of trading. 4Q GDP came in in-line at +1.7%. The Fed has stated that they expect the growth rate of the economy to rebound strongly in 1Q. I expect economic growth to moderate later in the year, as all of these rate hikes work their way into the economy.

Tech bounced at the open, but is currently struggling to stay in positive territory. Energy stocks are strong again, as oil and natural gas prices firm. And the brokers continue to make new highs. Not a bad mix.

The fact that the market is able to stay this strong in the face of both rising oil and higher interest rates (10-yr. = 4.84%) is a good indicator of the market's belief that this expansion is sustainable. Of course, this is predicated on the assumption that the Fed doesn't go too far and kill things.

The SPX got thisclose to making a new high above 1310 this morning, while the COMP extended its rally to new highs.

Quote of the Day

"If money is your hope for independence, you will never have it. The only real security that a man will have in this world is a reserve of knowledge, experience, and ability." ~ Henry Ford

Wednesday, March 29, 2006

Solid Reversal Day

Yesterday I commented that the outside day reversal was possibly foreshadowing further weakness. But, as always, follow through is the key. Today, we basically got a reversal of a reversal, with the SPX closing above Tuesday's opening levels and the COMP making new 52-week highs.

Volume rose nicely today, so there was some conviction behind the move (and it makes for an accumulation day). Breadth was also solid, with a strong A/D line and the Hi/Lo Index bouncing back sharply. I was also surprised to see the market essentially shrug off both higher oil as well as higher bond yields. Maybe the market is coming to terms with the durability of this expansion.

The Nazz outperformed handily today, which is nice to see. Recent laggards like Apple (Nasdaq:AAPL) and Google (Nasdaq:GOOG) both rose sharply today. There have been a lot of rotations from energy stocks to commodity plays to industrials to brokers. Maybe it is tech's time in the sun?


Standout Stocks

Here are some stocks making notable moves today:
  • AAPL - bounces strongly off of 200-day
  • NETL - analyst updgrade spurs move to new highs
  • CHIC - gaps higher on bullish outlook
  • IVAC - large order for systems spurs new highs
  • SHFL - continues its ramp towards the moon
  • AQNT - high volume reversal on analyst upgrade
  • PETS - drops below 50-day on volume; analyst downgrade
  • ACN - announces loss of large contract
  • RACK - first high volume pullback in months
  • UTIW - high volume reversal; earnings related

Market Comments: The market has surprised everyone and reversed yesterday's ugly session. The COMP has even made a new 52-week high, while the mid-cap and small-cap indexes move to new all time highs. I would like to see volume levels pick up in the last half hour, but the overall action in stocks is encouraging.


Has Apple finally bottomed?

Shares of Apple (Nasdaq:AAPL) are trading nicely higher today, after swooning earlier this morning. Nearly all attempts for this stock to bottom have failed, but the question remains, has AAPL finally bottomed?

The stock is off fully -33% since it peaked in mid-January. I think that such a decline likely prices in all of the concerns that are out there in the market: law of large numbers catching up with growth; Mac sales still disappointing; lawsuits from France and The Beatles, etc. None of these issues are "new".

The news today is about whether AAPL is in talks with the NFL about a new contract for exclusinve digital content. That would be big. There are also rumors swirling about a new iPhone coming out.

Today also looks like a good technical level for the stock to bottom. A look at the chart below shows that the stock had reached its 200-day moving average, often a good support area. The stock is also oversold by all of the measures on the chart. So I think it is safe to say the AAPL is in a good position to bounce. But we will have to see how stiff any overhead resistances proves.

long AAPL

Early Bounce

Morning News of Note:
  • PEP: PepsiCo Is Producing Plenty of Pop WHILE HEALTH-CONSCIOUS AMERICANS drink less soda, shares of beverage and snack food giant PepsiCo still have lots of pop and fizz. Up nearly 40% over the last five years, the stock price has climbed twice as fast as the Standard & Poor's 500 index and rivals such as Coca-Cola during that period, fueled by stronger profit growth than many of its peers. (Full Story) BARRONS
  • JDSU: JDSU's Makeover in Progress The Street remains wary of a turnaround that is far from complete, but a beefed-up product line stands a good chance of changing investors' minds (Full Story) Business Week
  • Desktop PCs: Digitimes reports desktop PC sales in Taiwan for the first two quarters of the year are expected to stay flat compared to the same periods of last year due to seasonal effects, according to vendors. According to International Data Corporation, desktop sales in Taiwan in the first and second quarters of last year amounted to 389,000 and 418,000 units, respectively, and the vendors said sales for the first two quarters this year should be similar to the respective ones of last year
  • Bulls/Bears: bulls 46.7 vs 46.3, bears 28.3 vs 30.5, correction 25 vs 23.2
  • US Economy: ABC/Washington Post consumer confidence (7) vs (8) wk ago // MNST Local Employment Index indicated rise in online job demand in all 28 top US metro markets; Western and Southern regions see particularly large spike in online recruitment activity
  • Mad Money Summary: If you are looking to make money on the coming bird flu pandemic, said Jim Cramer on Tuesday night, don't look to drugs like Tamiflu, look to pigs. Pork with be the only meat left without a "horrible disease that renders them inedible," so buy into the best of breed in the pork industry, Smithfield Foods (SFD). Cramer then discussed Oakley (OO), the sunglasses maker. He believes the company is a smart buy for this summer, because they are cleaning up their accounting problems. The stock will jump after the accounting restatement, so it could be a good idea to buy ahead of that. Then Cramer brought Herb Greenberg onto the show and they discussed Multi-Fineline Electronix (MFLX), which they both agreed to avoid. Greenberg said too much of the company's sales came solely from Motorola's (MOT) Razr phone. Then Cramer discussed natural gas stocks, including Houston Exploration (THX), Arena Resources (ARD), Carrizo Oil & Gas (CRZO), Energy Partners (EPL) and Cimarex Energy (XEC), saying there should be a rally after the sector's steep contango. In the Lightning Round, Cramer was bullish on Broadwing (BWNG), Level 3 (LVLT), TD Ameritrade (AMTD), Insteel (IIIN), Gamestop (GME), Leucadia (LUK), Yahoo! (YHOO), OSI Systems (OSIS), Flir Systems (FLIR), UnitedHealth (UNH), Altria (MO), Apple (AAPL), Palm (PALM), Goldcorp (GG) and Tata Motors (TTM) and was bearish on (REDF), Under Armour (UARM), Alkermos (ALKS), General Maritime (GMR) and Novagold (NG).

Market Comments: The market is bouncing in early trading. Of course, you know that I like a market that opens weak and finishes strong, not the other way around. But it's still early, so let's give the market the benefit of the doubt.

AMTD raised guidance last night, and that is helping the brokerage stocks bounce today. Semis are also up nicely, with the SMH up +1%. The only group that is down this morning is the banking index, likely due to interest rates fears as yesterday's FOMC meeting did not give any dovish hints about future rate hikes.

Friday is quarter-end, so I wouldn't be surprised to see big fund managers support their positions in some good old fashioned window dressing.

long JDSU, PEP

Quote of the Day

"Credit buying is much like being drunk. The buzz happens immediately and gives you a lift...The hangover comes the day after." ~ Joyce Brothers

Tuesday, March 28, 2006

Ugly Reversal

The market was trading nicely higher going into the FOMC meeting, but ended the day sharply lower. It wasn't as if anything surprising came out of the meeting. The wording of the announcement that gets released after the meeting was essentially the same as the last meeting. I guess more people were hoping for some hints that the Fed was nearer to the end of its rate hike campaign.

This was the 15th consecutive rate hike by the Fed, bringing the fed funds rate to 4.75%. Fed funds futures are forecasting an 80% certainty that the Fed raises again in May to 5.0%.

Back on 3/21, I stated that the ugly LROD (large-range outside day) for the indexes was likely foreshadowing more weakness over the next weak or so. Today is the 5th session since, and the FOMC meeting proved to be the catalyst for the downside move. Regardless, both the SPX and COMP put in a second LROD today, on rising volume.

Both of the indexes are still above their 50-days, so it's not exactly run and cover time. But these are additional warning shots across to which we should pay attention. The market is very overbought here, and could experience some consolidation. Rising bond yields and higher oil aren't helping either. I will look to raise a little cash on a bounce, and get more defensive if the market racks up additional distribution days.

SiRF dowgraded

SiRF Tech (Nasdaq:SIRF) was downgraded this morning at Morgan Stanley. The analyst thinks that the company could experience decelerating growth in 2006, which would hurt the stock due to its rich valuation.

He also thinks that the company will ramp its investments in handsets, autos, notebook PCs, gaming, and digital cameras. The increased investments could limit upside to EPS, with the payoff not beginning until 2007. He is not predicting a bad year for SIRF in 2006, but just one that may not live up to lofty investor expectations.

I am not sure that I fully agree with the analyst, as I think the strength of the PND market and at companies like GRMN remain strong. I do agree that expectations are lofty though.

The stock has gapped down roughly -5% today, on rising volume. But the stock is still above its 50-day ma. I have been looking for SIRF to make new highs here, but if it breaks down further, I may consider stepping aside and watching for a deeper correction.

long SIRF

Morning News

Morning News of Note:
  • C: Citigroup Likely To Make a Play For Turkish Bank Citigroup Inc.'s Charles Prince is considering making a big bet on Turkey. A year after the Federal Reserve effectively barred Citigroup from doing any "significant" merger deals, the Citigroup chief executive is expected to submit a final cash bid to acquire some or all of Finansbank, Turkey's eighth-largest bank by assets, in a transaction that could be valued at $5 billion or more, according to people familiar with the matter (Full Story) WSJ
  • CME: Oil Fight: CME to Launch Its Own Energy Futures The Chicago Mercantile Exchange said it plans to launch a raft of energy-futures products in June, targeting the market share of the New York Mercantile Exchange and IntercontinentalExchange Inc. While market observers had long expected the Merc to unveil its energy slate after June 17, when the exchange's noncompete agreement with the Nymex expires, the Merc has until now shied away from confirming a timetable. (Full Story) WSJ
  • VZ GOOG: Verizon joins Google AdWords Google and Verizon have signed a deal under which the classified ad provider will help its tens of thousands of marketers get ads onto Google search result pages, the companies said Monday. "We're pleased Verizon is an authorized AdWords reseller and helping local small businesses take advantage of the opportunities of search advertising," Google said in a statement. (Full Story) CNET
  • INTC: Intel Corp to attempt to control clone desktop market with "Cedar Wood"-DigiTimes. Intel Corp (INTC) will attempt to take complete control of the clone desktop PC market with its "Cedar Wood" program with initial partners including motherboard makers AOpen, Gigabyte Technology and Micro-Star International and distributor Synnex Technology International (SNX). The "Cedar Wood" program, which aims at reviving the clone desktop PC market, is similar to Intel's "Mobile Alliance" program set to launch at the end of this month
  • OVTI: OmniVision may start production of 3-megapixel image sensor this year-DigiTimes. According to executive VP Raymond Wu, OmniVision Technologies (OVTI) will be able to begin "volume production of its 3-megapixel CMOS image sensor with omni-focus functionality" by the end of the year. This was made possible by the company's acquisition of CDM Optics last year
  • XOM BP: Oil sector mergers totaled $160B in Mergers and acquisitions in the oil and gas industry tripled in value last year to $160B - the highest level since the boom year of 1998 when Exxon and Mobil merged to form XOM, BP took over Amoco, and Total bought PetroFina. The study by Harrison Lovegrove, the U.K.-based corporate advisers, and John S. Herold, the U.S. research firm, is widely regarded by the industry as the most comprehensive report on M&A activity in the sector. It is expected to show that last year oil companies were willing to pay 54% more for acquisitions in North America as executives bet that high oil prices were here to stay. Acquisition prices in the rest of the world shot up 350%
  • Mad Money Summary: Cramer opened his show discussing making money in ethanol. He reminded viewers that he previously recommended Archer Daniels Midland (ADM), which is up to $35 from $23. He said it's time to get out of Archer and get into The Andersons (ANDE), a "smaller, faster, cheaper company." Cramer then recommended Macquarie Bank (MBL.AU), a stock listed on the Australian exchange. Cramer then reminded viewers not to buy stocks in after hours trading and told viewers to do their homework on any company he recommends before buying. He also stressed using limit orders. Then Cramer spoke with Charles Kleman, the CFO of Chico's (CHS), and told viewers he could not recommend the stock as a Buy. In the Lightning Round, Cramer was bullish on Cephalon (CEPH), Vasco Data (VDSI), Mannkind (MNKD), Applied Micro Circuits (AMCC), Ciena (CIEN), Bookham (BKHM), JDSU (JDSU), Finisar (FNSR), Mindspeed (MSPD), MRV Communications (MRVC), General Dynamics (GD), Commerce Bank (CBH), Neoware (NWRE), Las Vegas Sands (LVS), Cisco (CSCO), Tellabs (TLAB), Valero (VLO), Intermagnetics (IMGC), Acadia (ACAD), and Texas Roadhouse (TXRH), and was bearish on ViroPharma (VPHM), New York Community Bancorp (NYB), Wynn Resorts (WYNN), Allscripts Healthcare (MDRX), Lucent (LU), Sirius Satellite Radio (SIRI) and Tim Hortons (THI).

long C, GOOG, INTC

Hurry Up and Wait

The market opens mixed this morning, with the Nazz slightly higher and the SPX down a touch. Of course, the early action means very little today, as the market waits for the announcement from the FOMC later today. The statement they put out will be closely scrutinized, and likely lead to some volatile action in the final 90 minutes of trading.

Oil is up again today, above $64, and that has the energy stocks catching a bid. Bond yields are also higher, with the 10-year yield moving up to 4.73%. The bond market should also have a strong reaction to the FOMC announcement, especially if the Chairman gives any hints about being closer to the end of the rate hikes.

Energy stocks and homebuilders are up in early trading, while consumer staples and utilities are under pressure.

Monday, March 27, 2006

Stock of the Day

Shares of SiRF Technology (SIRF) are strong again today, up +3% to $39. Brokerage firm Soleil came out with a note this morning about the strong quarter they believe GPS-maker Garmin (GRMN) is experiencing.

Given the rate at which GRMN is designing SIRF chipsets into its products, the firm thinks that SIRF could also be tracking to a better-than-expected quarter. They posit that SIRF could be tracking as high as 40-50% of GRMN's unit volume, above the firm's estimates of 35%.

GRMN's stock has been on fire recently. Competitor TOM Online (TOMO) is now close to breaking to new highs as well. I think all of this competition in the GPS market bodes well for SIRF, and I am looking for it to break to new highs.

long SIRF

Monday Morning Musings

Morning News of Note:

  • ISRG: Intuitive Surgical-ISRG reiterate Buy, momentum increasing in GYN surgery@DBAB The firm said that after attending the Society of Gynecologic Oncologists conference this weekend, they came away with increased confidence that GYN may be a "blockbuster end market for da Vinci."
  • F GM DCX: Hurricane Watch Ford hopes high-performance V-8 blows away rivals The Hurricane is back. A year after Ford Motor Co. killed its planned Hemi-fighting V-8 to the dismay of horsepower junkies, Ford Americas group chief Mark Fields has put the high-performance engine back in the company's product pipeline, according to sources familiar with the project. (Full Story) Detroit News
  • FSL MOT: Freescale Could Feel the Heat As Motorola Seeks Second Chip Supplier IT IS INCREASINGLY LIKELY that Motorola (ticker: MOT) will use a second chip supplier for its next-generation (3G) phones and handheld devices, which could spell trouble for Freescale Semiconductor (FSL). Motorola spun off Freescale to shareholders in 2004. Chips for wireless devices contribute about half of Freescale's revenue, and Motorola accounts for about 70% of that business. (Full Story) BARRONS
  • TOT: As Prices Surge, Oil Giants Turn Sludge Into Gold In February, engineers from French oil giant Total SA fired up colossal drum boilers to generate steam that will be pumped to a depth of 300 feet under the frozen ground here. If all goes well, by May, the steam will marinate a tar-like mix of oil and sand until the crude begins to flow. (Full Story) WSJ
  • Mad Money Summary: Jim Cramer opened his show up on Friday discussing DexCom (DXCM), which makes a glucose-monitoring system for diabetics, which he believes is the "next big medical device." Cramer then discussed Fuel-Tech (FTEK), which he says will benefit from a federal court ruling that will tighten pollution control guidelines. Then Cramer suggested buying Santarus (SNTS), the maker of Zegerid, a drug which has shown to work better than market leading drugs Nexium and Prevacid. In the Lightning Round, Cramer was bullish on American Eagle Outfitters (AEOS), Urban Outfitters (URBN), Evergreen Solar (ESLR), Thornburg Mortgage (TMA), Countrywide Financial (CFC), Accredited Home Lenders (LEND), DRS Technologies (DRS), L-3 Communications (LLL), CBIZ (CBIZ), Southwestern Energy (SWN), Houston Exploration (THX), Palm (PALM), NetEase (NTES), Yahoo! (YHOO), Rite Aid (RAD), CVS (CVS), Brightpoint (CELL), Cisco (CSCO), Alcatel (ALA), Lucent (LU), Tellabs (TLAB) Costco (COST) and Apple (AAPL), and was bearish on Abercrombie & Fitch (ANF), Computer Sciences (CSC), Geron (GERN), Isis Pharmaceuticals (ISIS), Exco Resources (XCO), Thomas & Betts (TNB) and Tom Online (TOMO).

Market Comments: The market opened mixed this morning. Techs are mostly higher, while medicals stocks are down on the heels of an analyst downgrade. Energy stocks are also down in early trading.

Oil is trading down today at around $63.50, while gold is trying to break out near new highs. Bond yields are slightly higher at 4.69% (10-yr yield).

This is a big week for the market. The FOMC meets today and tomorrow. This will be new Fed Chairman Bernanke's first meeting, though it is a foregone conclusion that they will raise rates. It is also quarter-end, which could bring additional volatility to the markets. And last, Google (GOOG) has been added to the S&P 500 Index, so there will be an underlying bid to that stock while simultaneously pressure on the remaining 499 stocks in the index subject to reweighting.

long GOOG

Saturday, March 25, 2006

Weekly Recap

The market focus this week was squarely on the Fed policy meeting Tuesday, March 28. Hopes rose and fell on whether or not there would soon be some sign that the current round of rate hikes is nearing an end. In the end, the markets ended unchanged for the week as the outlook for Fed policy remained unclear.

The action began on Monday. That evening Fed Chairman Bernanke was scheduled to speak before the Economic Club of New York. There was much talk that he might give some indication that the rates hikes would soon end.

The Wall Street Journal quoted us as saying that was "absurd", and that proved to be accurate.

There was no way Bernanke was going to announce policy intentions to a private group before he had ever chaired a policy committee meeting. Not surprisingly, he merely re-iterated long-standing opinions about the yield curve, and his comments were widely considered unclear with regards to policy.

The sensitivity to Fed policy was highlighted again on Thursday. February existing home sales data showed a surprising increase. This led to concerns that the Fed would be less likely to give indications of rate hikes ending if the economy was still strong. The S&P fell on the news.

On Friday, new home sales data for February showed a decline of 10%. This news was received positively by the stock market as increasing the probability that the Fed would soon stop raising rates. In reality, it has little bearing. But it is interesting that the stock market now prefers soft economic data because the focus has shifted to the interest rate implications.

Whether the Fed raises rates at the Tuesday meeting is not considered in doubt. The key question is whether they alter the policy statement to suggest that they will soon stop raising rates. The statement may change from the prior meeting, but it is unlikely that the Fed will provide much indication of the likely course for policy.

The Fed has made it clear that they will base policy on the incoming data. The economy remains strong, and while there are signs that inflation has remained stable, there are also signs that resource utilization remains an issue. That phrase was in the previous policy statement and refers to tight labor markets and high levels of capacity utilization in manufacturing.

The market may well be expecting too much from the policy statement.

There was other news for traders to act on this week, particularly among technology stocks. Google stock price jumped Friday on news it would be added to the S&P 500 index. Oracle had a good earnings report. Microsoft delayed the introduction of the consumer launch of Windows Vista.

Oil prices held their gains of last week and ended near $64 a barrel again. The 10-year bond yield also ended the week nearly unchanged at 4.66% from 4.67% the week before.

Next week's action is likely to be dominated by anticipation of, and reaction to, the policy statement on Tuesday afternoon.



Friday, March 24, 2006

Soft Rebound

The market has rebounded a bit from its earlier swoon, and is attempting to hang on to its gains. Bond yields finished at 4.67%, which is a good sign. It will be interesting to see if Wednesday's reversal portends more weakness next week, or if quarter end window dressing will help buoy the market.

Sorry for the lack of posts, I have been a bit swamped. Here is a quick list of stocks making notable moves:
  • NCTY
  • SSD
  • GHL
  • SIRF
  • SNDK
  • CEPH
  • WEN
  • PTI
  • ASF


Morning Bounce

Morning News of Note:
  • COH KSS: Coach sues Kohl's for trademark infringement-Women's Wear Daily. Coach (COH) has filed a lawsuit against Kohl's (KSS) for alleged trademark infringement and breach of contract for violating earlier settlement agreements between the companies. According to court documents, Kohl's allegedly infringed on Coach trademarks on a broad range of handbags and accessories sold in Kohl's stores and online. Kohl's declined to comment on the lawsuit.
  • CEPH: Cephalon ADHD Plan Is Set Back A Food and Drug Administration panel recommended that the agency reject a proposed drug from Cephalon Inc. to treat children and adolescents with attention deficit hyperactivity disorder because of concerns it might cause a potentially fatal skin condition. The outside panel of medical experts said that while it believed the drug would be effective at treating ADHD, it simply didn't have enough data on whether the drug could cause Stevens-Johnson Syndrome, a severe skin rash that can be fatal. (Full Story) WSJ
  • Fund Flows: equity funds rptd outflows ($1.7bln), ex ETFs rptd inflows $2.768bln, incl $1.68bln into domestic equities, lgst inflow since 2/9/05; taxable bond funds rptd inflows $787m; HY funds rptd inflows $49m, first inflows since 12/7/05; money mkt funds rptd inflows $17.492bln -- AMG Data
  • Mad Money Summary: Cramer opened his show discussing technology, saying the easy money was already made in Intel (INTC), Broadcom (BRCM) and Marvell (MRVL), and you should look past them to SiRF Technology (SIRF). The company makes a chip that is inside Garmin's (GRMN) new global positioning system device. Then he discussed Germany's SolarWorld, a German solar power company whose stock is coming to America. He says to get the stock before it comes to us so you can get it before it jumps. Then Cramer cautioned his viewers not to buy stock in after hours trading because "you'll never be fast enough" to compete against the most ruthless professional traders. Cramer welcomed Hibbett Sporting Goods' (HIBB) CEO Michael Newsome to the show. The company is a regional retail story with room to grow. The store currently operates in a 22-state area in the Sunbelt, but has identified 400 markets that it can expand. In the Lightning Round, Cramer was bullish on Starbucks (SBUX), optionsXpress (OXPS), Teva Pharmaceutical (TEVA), Broadwing (BWNG), Level 3 Communications (LVLT), Qwest (Q), Brookfield Asset Management (BAM), Brocade Communications (BRCD), Valero (VLO), Avon (AVP), Birch Mountain Resources (BMD), BHP Billiton (BHP), Agilent (A) and American Eagle Outfitters (AEOS), and was bearish on Blockbuster (BBI), Movie Gallery (MOVI), Bentley Pharmaceuticals (BNT), Intuitive Surgical (ISRG), Edge Petroleum (EPEX), Intevac (IVAC), Western Refining (WNR), Wendy's (WEN), Guidant (GDT), Waters (WAT) and Korea Electric Power (KEP).

Market Comments: After opening under some selling pressure, the market is now nicely higher. Maybe the $25 point surge in GOOG is actually helping. Now we need AAPL to pick itself up off of the canvass as well.

Also, a bigger than expected decline in Feb. new home sales is helping move bond yields lower. This is one of those times where we need to see some weak economic data to help our cause with the Fed.

The 10-year yield is down 5 basis points to 4.69%. Stocks are up pretty much across the board right now.


Friday Humor

"I almost had a psychic girlfriend, but she left me before we met." ~ Steven Wright

Thursday, March 23, 2006

Google (GOOG)

Standard and Poor's just announced that Google (GOOG) will be added to the S&P 500 Index as of the close on Friday, March 31st. This is big news, and has the stock +$25 in after hours trading. This is because the index managers need to buy shares of GOOG to rebalance their funds.

I don't know how many shares of GOOG these index managers need to add in total, but I think it should be enough to keep a strong bid under the stock into quarter end.

long GOOG

Early Weakness

Morning News of Note:
  • AAPL: JOBS FIGHTING FRENCH OVER ITUNES LAW Apple's Steve Jobs is threatening to halt the successful iTunes music service in France rather than give in to lawmakers there who want Apple to share its technology with other tech companies, The Post has learned. Sources say Jobs has been telling music industry executives that he may bail on France if the country passes a law requiring Apple to let users of digital music players other than iPods download music from iTunes. (Full Story) NY Post
  • Amex IPO: Amex to Become For-Profit Firm, May Hold IPO The member-owned American Stock Exchange plans to turn itself into a for-profit company by 2007 in preparation for possibly offering stock in itself. The century-old exchange -- once known as the Curb for its beginning as an outdoor street market near its current lower-Manhattan floor -- is the latest to try to take advantage of investors' growing interest in owning a piece of the places where financial instruments trade. (Full Story) WSJ
  • EBAY: Send $$$: PayPal to offer paying by text message Online payment company PayPal is preparing to offer a service that will let consumers make purchases or money transfers using simple text messaging via mobile phones, the company said on Wednesday. The move by PayPal, a unit of online auctioneer eBay, marks a big step in bridging the worlds of e-commerce and the physical world of brick-and-mortar stores by giving consumers a pay-as-you-go option via phones, analysts said. (Full Story) CNET
  • SBUX: SBUX Chairman says 30,000 store target "going to be light"-Reuters
  • TRLG: TRLG reaches tentative settlement with Joseph Canouse. Pursuant to the terms of the agreement, the Company has agreed to issue 100,000 shares of its common stock to Mr. Canouse as well as to make a cash payment of $100,000 to Mr. Canouse. The Company had previously taken a one-time, non-cash charge of $2.1 million and had accrued $100,000 for the proposed legal settlement in the fiscal fourth quarter of 2005
  • Mad Money: Jim Cramer opened his show by recommending Services Acquisition Corp (SVI), which just bought smoothie chain Jamba Juice for $265M. He believes the smoothie market could be the next big thing. Then Cramer discussed Weight Watchers (WTW), saying the company is back. Americans are willing to lose weight the hard way, learning how to be healthier at Weight Watcher meetings. Cramer then discussed the bull market in the railroad industry, saying the easy money has already been made, but Genesee & Wyoming (GWR) is still possibly a buy. Cramer then told a viewer who wrote to him that he still likes NightHawk Radiology (NHWK), even though the investor bought it near its all time high and lost 10%. In the Lightning Round, Cramer was bullish on Under Armour (UARM), Anglo American (AAUK), International Game (IGT), Genentech (DNA), Amgen (AMGN), Sara Lee (SLE), Kraft (KFT), Kellogg (K), CVS (CVS), BHP Billiton (BHP), Home Depot (HD), Lowes (LOW), Conoco Philips (COP) Chevron (CVX), Occidental Petroleum (OXY), Vitesse (VTSS), Ciena (CIEN) and Tata Motors (TTM), and was bearish on Microsoft (MSFT), Dell (DELL), Sirius Satellite Radio (SIRI), Multimedia Games (MGAM), Stereotaxis (STXS), Smuckers (SJM), Silver Wheaton (SLW), Medarex (MEDX), Fred's (FRED), Laserscope (LSCP), Petrohawk Energy (HAWK) and Sony (SNE).

Market Comments: The market is under a bit of pressure in early trading. Some notable disappointments on the earnings front were Adobe (ADBE) and YRC Worldwide (YRC), who lowered guidance and the stocks are down sharply.

Existing home sales were up more that expected, and that is helping the homebuilder stocks bounce. Semis are also bucking the early weakness, along with energy stocks. Healthcare stocks are pretty much down across the board.

Bond yields are slightly higher at 4.71%.

long AAPL

Quote of the Day

"I have never been in a situation where having money made it worse." ~ Clinton Jones

Wednesday, March 22, 2006

The Final Stretch

The market seems to be hanging in there pretty well coming into the home stretch. The Nazz is lagging, but that is expected given the Microsoft (MSFT) news.

Energy stocks have given back some of their earlier gains, but still look to close up on the day after the bullish inventory data. Biotech and brokers are also up nicely today, while the semi index is the only one down currently.

The put/call ratio ran above the 1.0 level most of the day, which probably helped the market stay strong into the close. Volume looks like it will come in below yesterday's levels. So while it is a nice bounce, I don't think it negates yesterday's action. I would remain cautious, and look for additional selling to surface over the next few days.

Mixed Open

Morning News of Note:
  • KBH: KB Home's Turn...Expect more bad news about the U.S. housing market when KB Home reports quarterly results today. In the annual report it filed last month, the company said it saw more order cancellations in December and January, and fewer net orders than it had in the year-earlier period. That weakness likely persisted into February. Last week the Federal Reserve's "beige book" -- a roundup of anecdotal reports on business conditions gathered by the Fed's regional banks -- pointed to further cooling in the U.S. real-estate market in February. And builders surveyed by the National Association of Home Builders have been ratcheting down their outlook on the business since last summer. (Full Story) WSJ
  • ESLR: Piper Jaffray comments on China solar tour; says no panacea to poly shortage (14.32 ) Piper Jaffray believes China is likely to be of paramount importance to the solar industry because of its low-cost manufacturing capabilities and potentially enormous domestic demand driven by new government programs. For these reasons, they anticipate that many global solar OEMs are likely to pursue China strategies following the lead of Ersol Solar Energy AG with its JV investment in Shanghai Electric Solar Energy. Conversely, they think many of the Chinese solar OEMs may forward integrate by acquiring installers/integrators in Europe and the U.S. They believe that despite the blossoming low cost and integrated solar food chain in China, and several polysilicon feedstock plants that are under construction, there is no panacea to the current polysilicon shortage. They think solar companies operating in China will play an important role. However given that polysilicon, the major cost driver of solar today (raw poly is 40% of cost), is in short supply with rising prices, they prefer companies that possess technology that reduces (ESLR) or eliminates (ENER) the need for polysilicon. Also, firm views polysilicon suppliers as lower risk solar investments (WFR).
  • GLW: Corning develops glass free of heavy metals-WSJ Corning (GLW) says its researchers have developed a glass that is free of heavy metals such as arsenic, antimony and barium. This could give the company, which is the biggest maker of glass for LCD televisions, a "marketing edge" in areas with strict environmental regulations. Corning VP Peter Bocko said of the development, "All the LCD glass that's out there today meets all environmental regulations. We're trying to be forward looking and not have to react to new regulations."
  • STJ BSX MDT: Medicare Says It Will Cover Test For Heart Device...A little-known test that predicts which patients make the best candidates for implantable heart defibrillators has received the nod for federal insurance coverage, a move that could damp the outlook for the hot-selling devices. The noninvasive cardiac test, developed by Bedford, Mass., Cambridge Heart Inc., uses a machine to measure nearly undetectable fluctuations in a person's heartbeat during mild exercise. Yesterday the federal Centers for Medicare and Medicaid Services, or CMS, decided to allow Medicare reimbursement for the $400 test on a national level, boosting prospects for Cambridge Heart, which has been struggling, and bringing some level of closure to a contentious debate about the test's merits. Medicare is the federal-state insurance program for the elderly. Yesterday's decision doesn't extend to Medicaid, the parallel program for the impoverished. (Full Story) WSJ

Market Comments: Stocks open mixed as the SPX is up a bit, and the Nazz is lower on the heels of disappointing news out of Microsoft (MSFT) that it will delay the launch of its much anticipated Vista operating system.

Energy stocks are finally getting a bounce this morning, on news that inventories fell more than expected (EIA data). Bond yields are a little lower, with the 10-year at 4.69%.

Yesterday's market action was short-term bearish, so regardless of how today ends up, we need to be on watch to see if there is any kind of downside follow-through to come.

long GLW, MDT

Quote of the Day

"When it is a question of money, everybody is of the same religion." ~ Voltaire

Tuesday, March 21, 2006

Nasty Reversal

The indexes did in fact put in negative LRODs (large-range outside day) today. The fact that volume picked up also made it a distribution day. And breadth was pretty negative. So the action was bearish, at least in the short-term. One of the few siliver linings on the day was the fact that put/call ratios did pick up into the close.

The upside reversal in oil late in the day combined with rising bond yields seemed to overwhelm the equity markets in the afternoon. The market has shown little memory from day to day, so it remains to be seen if this will develop into a more meaningful correction, or if it is simply a quick trip lower that will again be bought by the dip buyers.

Standout Stocks

Here are some notable stocks for today:
  • (NOIZ) - extending yesterday's breakout to new highs
  • (BOT) - record seat sales at the Board of Trade
  • (KEX) - raised outlook spurs gap to new highs
  • (DRIV) - raised guidance; stock gaps to new highs
  • (NVDA) - analyst upgrade helps spur rally to new highs
  • (FDG) - lowers distribution due to coal production
  • (HAR) - gaps lower from new highs yesterday
  • (TRLG) - 7% drop; weak technicals
  • (SMTS) - more new lows on analyst downgrade
  • (CMED) - nearings last weeks lows

Market Comments: The market attempted to stage a midday breakout, but quickly reversed lower. The SPX and COMP are putting in negative outside days so far, a bearish sign. The market is at fairly overbought levels also, so we could see more of a pullback from these levels. It might not be a bad idea to lock in a few profits here. Let's see how the market fares in the closing hour.

Bernanke Speaks

Morning News of Note:
  • CVC: CABLEVISION PLANS VIDEO NET Cablevision's Rainbow Media, in a bid to attract more viewers from the coveted young male demographic, is launching a video game network. The new channel, which will be part of Rainbow's Voom HD Networks unit, will be called Gameplay HD and air original programming, news on the gaming industry and game competitions. (Full Story) NY Post
  • Paying With CellPhones: Ring Up My Bill, Please Roy Peek had about $40, three credit cards and a debit card in his wallet. But to pay for a Coke and a slice of pizza here at a Philips Arena concession stand, he whipped out his cellphone. "With this, I don't have to hurry, I don't have to stop at an A.T.M.," said Mr. Peek, shortly after tapping the device against a coaster-size terminal that flashed lights and beeped as it billed his credit card account. (Full Story) NY Times
  • Energy Trading: The Energy Trading High Wire Sky-high prices have made energy trading look like easy money. Look again. In recent months, Credit Suisse Group and Lehman Brothers Holdings Inc. have piled into the business, witnessing the billions of dollars that competitors at Goldman Sachs Group Inc. and Morgan Stanley have made as Wall Street's two top commodities players. (Full Story) WSJ
  • AAPL: Apple Computer could face tough decision in France-FT. The parliament in Paris is expected to approve a draft copyright law that will force Apple Computer (AAPL) to open up its digital music business to competitors. Apple's iTunes program currently prevents other music players from playing songs downloaded on its service, but the French bill "seeks to impose interoperability on online music stores and break Apple's closed system." This will force Apple to choose to either make their downloaded music compatible with rival platforms or pull out of France entirely. Apple said it was waiting for the law to be passed before making any comment.
  • Energy Trading: The Energy Trading High Wire Sky-high prices have made energy trading look like easy money. Look again. In recent months, Credit Suisse Group and Lehman Brothers Holdings Inc. have piled into the business, witnessing the billions of dollars that competitors at Goldman Sachs Group Inc. and Morgan Stanley have made as Wall Street's two top commodities players. (Full Story) WSJ
  • GOOG: Internet search engine company Google (GOOG) has launched a financial data and news website titled Google Finance. The free service will be launched in beta form and can be found at
  • MOT: Dow Jones is reporting that Motorola is in talk with Reliance Infocomm, an Indian mobile service provider, for Internet Protocol Television, also known as IPTV, set-top boxes
  • TGT: TGT sees March SSS up 1.5%-2.5%-Dow Jones. TGT sees March-April SSS up 4%-6%.
  • Mad Money Summary: Jim Cramer opened his show recommending Canada's largest fast-food chain, Tim Hortons, which will have its initial public offering tomorrow, Wednesday, March 22, 2006. The company will go public on the NYSE under the symbol THI. Cramer said the investment in Tim Hortons was not a long term investment. Place an order for up to $24 a share and sell once you see reasonable profit, he said. Then Cramer discussed Mindspeed Technologies (MSPD), a cheap stock which is involved in VoIP. Then Cramer discussed Tyler Technologies (TYL), which has the growth "you should be chasing relentlessly." The company capitalizes in local government inefficiencies. Cramer then invited the CEO of Medicis Pharmaceuticals (MRX), Jonas Shacknai, to the show. Cramer believes Reloxin, a wrinkle treatment that Medicis manufactures, will become popular in the U.S. In the Lightning Round, Cramer was bullish on Rent-a-center (RCII), Conexant (CNXT), Wal-Mart (WMT), Rambus (RMBS), Ericsson (ERICY), Cameco (CCJ), GameStop (GME), Triad Hospitals (TRI), Halliburton (HAL), Nabors (NBR), Cendant (CD), Vodafone (VOD), Alcan (AL), Powerwave Technologies (PWAV), Marathon Oil (MRO), Ultra Petroleum (UPL), ConocoPhillips (COP) and Chevron (CVX), and was bearish on PF Chang's (PFCB), Comtech (CMTL), USEC (USU), HCA (HCA), Bronco Drilling (BRNC) and ViroPharma (VPHM)

Market Comments: Bernanke's comments were mildly dovish last night, even if they were slightly ambiguous. He implied he isn't worried about the flat yield curve, and isn't sure why long-term rates remain so low.

The core PPI came in a little above expectations this morning, and that has bond yields rising 5 basis points to 4.70%. This is pressuring the stock market a bit. Oil is also trading lower again, spurring more selling of oil and gas stocks.

The President is speaking right now, which never seems to help the market much. Why does he always have the little smirk on his face? Oh well, back to the markets.


Quote of the Day

"Money is a singular thing. It ranks with love as man's greatest source of joy. And with death as his greatest source of anxiety." ~ J.K. Galbraith

Monday, March 20, 2006

Benign Day

Today's action was pretty benign, given the worry about a post-expiration hangover. Semis were higher, while housing stocks and energy were lower for the day. A big plunge in oil hurt the energy complex.

Financials were also strong again, due to the fact that bond yields are no longer rising, and talk that the Fed could be done raising rates soon has improved the sentiment for financial stocks.

And our old friend Google had its first strong day in what feels like my lifetime. If GOOG can start working its way higher, that could also improve the outlook for the Nasdaq, which has been lagging the other major indexes of late.

long GOOG

Standout Stocks

Here are some stocks making notable moves today:
  • NOIZ - big contract spurs new highs on volume
  • ABAX - high volume breakout to new highs
  • NTES - ADR ratio adjustment = 4:1 split
  • FFIV - breaks out to new highs
  • EZPW - more new highs; stock looks extended
  • CMVT - further breakdown on acctg. concerns
  • KNDL - high volume, negative reversal
  • BABY - testing 50-day moving average
  • FDG - disappointing production numbers
  • TALX - further breakdown

sold FFIV

Monday Morning Musings

Morning News of Note:
  • AAPL: Apple reserves room for changes atop iPod line Without explicitly stating so, Apple has taken measures to allow itself room to make changes at the top of its iPod product line this spring, if it chooses to do so. The Cupertino, Calif.-based company recently informed some of its partners and big box retailers that it has placed the top-of-the-line 60GB fifth-generation iPod on its 60-day "at risk" list. The 30GB iPod was not placed on the list. (Full Story) Apple Insider
  • VZ: While AT&T Does Deals, Verizon Spends to Hone Its Networks Ivan Seidenberg is known in the telecommunications industry as a chief executive who makes all-or-nothing bets. Since the late 1990's he has often been the man to beat, having created Verizon Communications — for a time America's largest phone company — by merging Nynex with Bell Atlantic and then buying GTE. (Full Story) NY Times
  • BRL MYL TEVA WPI RDY: Generic Pharmaceuticals: Anticipate global consolidation to continue-Attract@GSCO The firm ascertained that there is more opportunity than threat for global expansion within the Indian generics industry following their meetings with leading Indian manufacturers. With the amount of products coming off of US patent protection in the next 2-3 years, it was obvious Indian manufacturers are quite focused on pipeline growth. Expectations are for recent consolidation trends to continue inside and outside the U.S
  • DNA: Genentech-DNA overreaction to higher guidance from Analyst Day-Neutral@MLCO The firm said DNA's higher guidance was from higher sales to collaborators, which has low margins and growth, and not from higher product sales. The firm also believes investment income will be higher due to biotech stock gains
  • Mad Money Summary: Jim Cramer opened Friday's show discussing L'Oreal's purchase of Body Shop for over $1B. He says the way to make money off of this story is to buy Limited Brands (LTD), which is "kind of like the company that got the bid today." Then Cramer praised Barnes & Noble (BKS), which he called a "Starbucks for the literate" because of its atmosphere. He said to wait for a pullback to buy the stock, however, because the stock just jumped 10% on a good quarter. Cramer then discussed a BusinessWeek article that mentioned Hershey (HSY) as a takeover target. He said Hershey's stock could fall because the head of the company denied the story, which could be a chance to buy. Aqua America's (WTR) CEO Nicholas DeBenedictis phoned in to explain the company's poor performance, saying the company is in good shape because "water is no less precious than it was a quarter ago." In the Lightning Round, Cramer was bullish on Encore Medical (ENMC), Valero (VLO), Transocean (RIG), Nabors (NBR), Schlumberger (SLB), Dow Chemical (DOW), Constellation Energy (CEG), Essex (KEYW), Manulife Financial (MFC), Watsco (WSO), Hexcel (HXL) and Airgas (ARG), and was bearish on Holly (HOC), Parker Drilling (PKD), Helix Energy Solutions (HELX), Intel (INTC), NYSE Group (NYX), CyberSource (CYBS), Homestore (HOMS) and CarrAmerica Realty (CRE).

Market Comments: The market opens slightly higher this morning, despite the possibility of an options expiration hangover about which many were worried. Bond yields are trading lower, with the 10-year around 4.65%.

The sectors are mixed in early trading, with semis higher and biotechs lower. But it's still very early in the day.

Also, I was surprised to see how bearish some of the sentiment indicators came in last week. Especially given that the market was making new yearly highs, and the SPX was up every day last week. I will go into some of these sentiment indicators a bit later.

long AAPL

Quote of the Day

"Money will buy you a bed, but not a good night's sleep; a house, but not a home; a companion, but not a friend." ~ Zig Ziglar

Saturday, March 18, 2006

Weekly Recap

Here is a recap of this week's market activity:

The S&P 500 index was up every day this week. This was not due to specific news, but rather to a growing belief that the Federal Reserve may be nearing the end of its current rate hike phase.

That line has been heard before. That doesn't matter, and neither does the fact that there was little from the Federal Reserve to change market perceptions. There was a bit of data that helped, but not much.

The February core CPI was up 0.1%. That was a bit below an expected gain, but the underlying trend in inflation hasn't changed much. On a year-over-year basis, the core CPI is up 2.1%. The annualized rate of increase the past three months is 2.0%. The past two months it is also 2.0%. That isn't a lot for the Fed to hang its hat on in terms of claiming victory. The inflation news clearly isn't bad, but it also isn't a change in trend.

Economic expectations haven't changed either. The economic data this past week was mixed. February retail sales were down a larger-than-expected 1.3%, but that was after a big 2.9% January jump. February housing starts fell sharply but were higher than expected and remained high at over a 2.0 million annual rate. February industrial production jumped 0.7%.
On balance, the economic data left first quarter forecasts for real GDP near a 4.5% annual rate.
The earnings calendar was light. Brokers reported some very impressive numbers. That was good news, but doesn't really have implications for the broader market.

What really helped this past week was the belief that the overall fundamentals are good. Most importantly was increased confidence that the Fed will not raise rates too far, and endanger economic and earnings growth. This led to a very broad natured rally, with most sectors and a huge percentage of stocks posting gains for the week.

Whether the Fed statement a week from Tuesday supports the increased optimism about Fed policy remains to be seen. For now, however, that is what has market sentiment very upbeat.
The April oil futures contract closed the week at over $64. That was up from $62 a week before for the near-term contract. The 10-year bond yield closed at 4.67%, down from 4.75% the week before.

Friday, March 17, 2006

Standout Stocks

Here is a list of some stocks making notable moves today:
  • ISRG - has bounced nearly 20% from last week's lows
  • NCTY - hitting new highs on spike in volume
  • HLEX - day 2 of spike to new highs
  • CHE - breaking out to new highs on volume
  • PONR - reversing yesterday's losses; EPS-related
  • SMSC - breaks down further on high volume
  • MRGE - 11% gap lower; delays filing
  • USAK - day 2 of selloff; analyst downgrade
  • JCOM - delays annual report; breaks under 50-day
  • CTAS - earnings ok, but outlook lowered

Market Comments: The market is weakening as we head into the last hour. Semis have clawed their way back into positive territory while energy stocks are still under pressure. 10-yr. yields are higher at 4.67%. The put/call ratio has rebounded to 0.82 after closing at just 0.32 yesterday. I can't remember the last time I saw a reading that low.

The Witches Are Here

Morning News of Note:
  • GOOG: Google Wins Copyright Battle; Archiving Issue Is Still Unclear A federal judge dismissed a lawsuit accusing Google Inc. of wrongful conduct, including copyright infringement and defamation, providing the latest court opinion to weigh in on the contentious area of search engines and copyright. Some legal experts said the ruling, issued last week in a case brought by Internet publisher Gordon Roy Parker in U.S. District Court in Philadelphia, could influence judges in other cases pending against Google, potentially bolstering the Internet company's legal defenses. (Full Story) WSJ
  • AAPL: Apple Phone May Steal Motorola's Appeal THE SUCCESS OF THE IPOD PLAYER and the iTunes music store has set the stage for Apple Computer to introduce its own branded song-playing cellphone later this year. And while the new competition may prove troubling for all the major cellphone makers, it will likely have the biggest impact on Motorola, the leading cellphone maker in the U.S., Apple's strongest market. (Full Story) BARRONS
  • SIRF: SiRF Technology-SIRF acquires Truespan for cash, stock. TrueSpan is developing a silicon and software platform that brings high quality digital audio and video experience to consumers in mobile environments
  • Mad Money Summary: Jim Cramer was bullish on shares of Brocade Communications (BRCD) on his show last night and believes that now is the time to buy. Cramer said that shares trade at a "nasty discount" to its peer group due to the company's tainted history. Cramer believes that Brocade could beat its quarterly earnings due to the positive move in the network storage market. Cramer said "if you pay up to $6, I think you're fine." Cramer also changed his "antibottling stance" last night on his show and recommended shares of Fomento Economico Mexicano (FMX). He said that Fomento is the number two coke bottler and it is only getting bigger as well as being the second largest brewer in Mexico. Cramer said that while shares jumped, as Bear Stearns (BSC) beat him to the punch, he still believes shares are a buy. Cramer said that it is hard to find a stock that is involved in multiple Bull markets, but Textron (TXT) is one. He said that Textron's helicopters, private jets & tanks are all in a Bull market as the Army is replacing its helicopters with Textron's, the company's Cessna unit is the biggest maker of small/medium sized jets and the company's tank business should benefit from the industrialization of Brazil, Russia, India & China. Cramer also believes it is time to buy shares of Powerwave Technologies (PWAV) and CEO Ronald Buscher said that there is a lot of room for growth. In the Lightning Round, Cramer was bullish on Chesapeake Energy (CHK), Apple (AAPL), LifeCell (LIFC), Energy Transfer Partners (ETP), Palm (PALM), Avista (AVA), Blackboard (BBBB), Pain Therapeutics (PTIE), Kulicke & Soffa Industries (KLIC), Citrix Systems (CTXS), Allied Waste (AW), Ameritrade Holdings (AMTD), Charles Schwab (SCHW), E*Trade Financial (ET), Peabody Energy (BTU), Arena Pharmaceuticals (ARNA), Smurfit-Stone (SSCC) and Costco (COST)), and was bearish on BioMarin Pharmaceutical (BMRN), Gap (GPS) and True Religion Apparel (TRLG).

Market Comments: The market is fairly flat in early trading, but volume is spiking to record levels. This is due to "quadruple witching", which is the simultaneous expiration of four different futures and options contracts. That means that today will likely be more volatile than otherwise, and that it will not be a good day to draw conclusions about the future direction of the market.

Most sectors are higher this morning, with the exception of semis and most of the energy complex. OPEC revised its outlook for oil demand slightly lower today, as higher prices have curbed demand a bit. This should help the inflation outlook at the margin.

March Madness? Bring it on.

long GOOG

Friday Quote

"Do you think that when they asked George Washington for ID that he just whipped out a quarter?" ~ Steven Wright

Thursday, March 16, 2006

Negative Reversal

The markets closed mixed today, with the SPX hanging on to a small gain and the COMP reversing all of its gains and finishing down. Volume rose today, making for a distribution day on the Nazz. The action there got pretty ugly, with the SOX down -3.2% today.

I sensed the market was going to have a rough time hanging onto its gains as the put/call ratio was extremely low all day. And oil was spiking up over $1, closing near $63.50. Of course, some of this could also be related to expiration tomorrow.

The one big positive was the plunge in bond yields, with the 10-year falling 8 basis points to 4.65%. This helped housing stocks put in a solid day. It should also help bolster sentiment towards equities. I'm still leaning long for the time being.

Money and Divorce

CNNMoney ran an article yesterday about fights over money and how to keep them from leading to divorce. I'm not sure I fully agree with all of the points the author makes, but there are probably some useful tips in there for everyone.

For what it's worth, here is the article

True Religion

I covered the TRLG conference call last night for, and I thought the results were solid. The stock sold off in after-hours trading, but it back up today. It's not up much, as the results were not blowout. But EPS and revenues were in-line, and management did raise guidance slightly for Q1 and 2006.

I think that the stock is a good value here at roughly 16x fwd. earnings. I saw that 3 analysts raised their price targets for the stock this morning. I agree with most of them. Right now, I think the stock is still digesting its 100% run from November into February. But after some consolidation, I think the stock can move higher. I plan to keep my eye on it.

More Early Strength

Morning News of Note:
  • VOD: Equity Firms Ready Rival Bid For Vodafone Unit Two buyout firms last night were preparing to make a roughly $15 billion bid for Vodafone Group PLC's Japanese mobile subsidiary, people familiar with the situation said. Cerberus Partners LP and Providence Equity Partners Inc. have been racing in recent days to secure financing for the bid, people close to the situation said. Vodafone is already in talks to sell the Japanese unit to Softbank Corp., one of Japan's largest Internet providers. (Full Story) WSJ
  • NDAQ / London Stock Exchange: Heard on the Street... London Call: Are LSE's Shares Undervalued? Shares in London Stock Exchange PLC have nearly doubled since the start of the year, thanks largely to Nasdaq Stock Market Inc.'s proposal last week to acquire the centuries-old market for $4.2 billion. But by one measure, at least, LSE's suddenly lofty shares don't seem expensive -- Nasdaq's own stock, which trades at a far higher valuation. (Full Story) WSJ
  • RIMM: Some BlackBerry users frustrated by outages Research In Motion confirmed Wednesday that several BlackBerry customers service experienced outages this week due to a software upgrade, which was the feared outcome if RIM had been forced to implement its workaround technology. Several customers with Cingular, T-Mobile, Verizon Wireless and Sprint's Nextel service reported delays, outages and problems with their BlackBerry Internet Service, or BIS, starting early this week and continuing through Wednesday. A Cingular customer told CNET that his carrier support representatives were pointing to an issue with RIM's servers--a diagnosis that a Cingular representative confirmed. (Full Story) CNET
  • Copper: A Red-Hot Desire for Copper With demand for copper sending prices higher, there is a worry for everyone from mining companies to microwave-oven makers: the lack of new mother lodes to tap. In the 1990s, Chile emerged as the Saudi Arabia of copper. An era of political stability there enabled foreign and domestic companies to extract epic deposits of minerals, flooding the globe with supply. (Full Story) WSJ
  • GOOG: Google-GOOG will offer retailers a "base" to reach online consumers-FT. Google (GOOG) is creating services for the European retail industry that will allow them to sell and market their goods more easily online. Google is positioning itself to access retailers internal database of products and prices, then categorize them and make them available to online consumers who are searching the web. The project is expected to appeal to large retailers who have not yet invested in their own internet retailing presence and have a desire to be competitive in the online shopping arena

Market Comments: The market is higher in early trading, but I have reservations about another strong day. I would think some rest is in order. The CPI report came in better than expectations this morning, and that is helping bonds rally, pushing the 10-year yield down to 4.67%. That is a big positive for the market.

The US military is launching new air strikes in Iraq, so that could cause a little worry too, at least on the geopolitical front. There is a lot of talk about Iraq, Iran, and the low poll ratings for Bush.

But let's keep our eyes on the market, and look for new breakouts and new leadership.

long GOOG

No QotD

No quote this morning. I'm a little tired after a late night at Koi. I went out with some mutual fund guys last night, who were in from out of town. They always like to go to the hotspots where they think they will see celebrities. That's always a hit and miss agenda.

We saw Jon Lovitz and David Spade as we walked in, but that wasn't very exciting to them. Then Kenny "Babyface" Edmonds sat down next to us, which was kind of cool. But the highlight of the night for them was when Paris and Nicky Hilton walked in. One guy got on the phone and called his wife right away to tell her. Too funny. I felt good though, as they now had a good story to take back home (to Minnesota!).

Wednesday, March 15, 2006

Late Day Strength

Today's market action was great. The market was weak early, but built on its strength late in the day to post a solid finish. Volume levels rose, making for back-to-back accumulation days.

Breadth was again solid, and the number of new highs expanded nicely. Moreover, the Dow Transportation (TRAN) index surged to a new high. I heard some technicians complaining about the "Dow non-confirmation" yesterday, and the industrials made a new high but the transports did not. After today, you can scratch that concern off of your list.

Networking stocks have been leading the action, which bodes well for the Nazz. I expect it to play catch-up and for more stocks to break out.

Standout Stocks

Here is a list of stocks making notable moves today:
  • VIMC - up 17% on IBD feature story
  • KEX - high volume surge to new highs
  • NEU - analyst updgrade spurs new highs
  • VMC - gaps higher on increased guidance
  • MFLX - more new highs (if you want to see a picture of the idiot who sold this stock, look to the upper right of this site)
  • FIC - day 2 of selloff
  • UVV - gaps lower on news of convertible offering
  • CTRN - negative reaction to earnings; stock recoups early losses
  • SMTS - 10% drop in reaction to earnings
  • CEPH - high volume selloff as stock approached new highs

Market Comments: Today's market action is much better than we have witnessed recently. After yesterday's strong rally, the market was weak most of the day today before breaking into positive territory and picking up steam into the afternoon. This is how I prefer things-- weakness early, morphing into late day strength.

Nazz in Position to Play Catch-up

Morning News of Note:
  • Oil/Gas M & A: Oil-Firm Merger, Tactic Controls Appear to Advance in the Senate A proposal to place further restrictions on oil-company mergers and marketing tactics appears to be gaining support among Senate Judiciary Committee members who see the approach as a way to respond to consumer complaints about soaring gasoline and natural-gas prices. But the industry doesn't see it that way, and the effort could face significant hurdles (Full Story) WSJ
  • GS: Heard on the Street... Money Machine: Goldman Profit Breaks Record Goldman Sachs Group Inc. set the bar for the rest of Wall Street yesterday with record-breaking earnings. The profit reflects rising fees from the recent flurry of merger and acquisitions, and a continued strong trading environment for both stocks and bonds -- a scenario that may also benefit Goldman rivals that are scheduled to report results. (Full Story) WSJ
  • KSS: Investors May Find Kohl's Finally Fits IN ITS TELEVISION COMMERCIALS, Kohl's urges its customers to "expect great things" from its midpriced department stores. That also goes for its stock price, despite years of disappointing performance. Certainly, skeptics of such a claim have reason to be doubtful. Though up 26 times since going public in 1992, Kohl's stock price has lagged the Standard & Poor's 500 index over the last one, two and five years, says Thomson Financial/Baseline. (Full Story) BARRONS
  • GOOG: U.S. Limits Demands on Google After the Justice Department drastically reduced its request for information from Google, a federal judge said on Tuesday that he intended to approve at least part of that request. The government first subpoenaed Web data from Google last August, as part of its defense of an online pornography law. (Full Story) NY Times
  • Mad Money Summary: Cramer celebrated the one-year anniversary of "Mad Money" by going straight to the phone lines. A caller wanted to know about 1-800-Flowers (FLWS), but Cramer said he'd prefer soybeans, in the form of Bunge (BG). He then told another caller to avoid Sepracor (SEPR) because of recent negative publicity. Then he told a caller he liked Lions Gate (LGF) because "Crash" just won the best picture Oscar. He also likes CBS Corp (CBS) ahead of March Madness and sees Disney (DIS) hitting $30 a share. In the Lightning Round, Cramer was bullish on ViroPharma (VPHM), Advanced Micro Devices (AMD), Energy Conversion Devices (ENER), Evergreen Solar (ESLR), Rite Aid (RAD), Walgreen (WAG), Halliburton (HAL), Domino's Pizza (DPZ), Allegheny Technologies (ATI), ZymoGenetics (ZGEN), Broadcom (BRCM) and Marvell Technology (MRVL), and was bearish on Broadwing (BWNG), Fuel Cell (FCEL), Foxhollow (FOXH), Sirius (SIRI), Titanium (TIE), and Texas Instruments (TI).

Market Comments: The market's open is fairly muted this morning. LEH reported a good quarter, but most of the strength in the brokers came yesterday on the blowout quarter from Goldman.

Tech stocks are mostly higher, although GOOG is giving back some of yesterday's gains. But as long as the stock can close in the upper half of yesterday's range, I will be happy.

With the Dow and S&P making new highs, I think the Nazz will play catch-up. That should make for some good trades in growth stocks. Along those lines, I have added some exposure.

long GS, GOOG

Quote of the Day

"Who is wealthy? One who is happy with what they have." ~ Pirkei Avot

Tuesday, March 14, 2006

Follow-Thru Right On Cue

What a solid day in the market. According to IBD's research, most market follow throughs come in the form of an accumulation day 4 to 7 days after an initial rally attempt. By my count, this would qualify as day 5 after last Wednesday's strong upside reversal day.

That doesn't guarantee anything, but it is another bullish data point to go along with improving technicals and still skeptical sentiment. More often than not, that is a good recipe for future gains. GOOG and AAPL put in very solid days, and it looks like both stocks have bottomed for now. I will be looking for more breakouts to come if the market stays strong.

Standout Stocks

Here are some stocks making notable moves today:
  • VTIV - strong EPS sparks rally
  • DXPE - 13% move to new highs
  • GS - blowout EPS; stock hits new highs
  • MFLX - climbing back near old highs
  • ASEI - breaks above recent flag consolidation
  • GOOG - finally a bottom?
  • CMVT - gaps lower on earnings restatement
  • LVS - secondary offering pressures stock
  • FIC - big drop after news of competitive credit product
  • STTX - Goldman downgrade hurts stock

Market Comments
: The market has built on its early gains in a big way. The SPX is close to making a new high for the year. Bond yields are dropping today, down nearly 8 bps to 4.70%. This is really helping the market, despite the fact that oil is higher today.

I would like to see volume pick up for it to be a true follow-through day, so that is something to watch. I would also like to see the number of new highs begin to expand if this rally holds.

Nearly all sectors are participating, except for biotech. Homebuilders are still leading the way, but semis have rebounded quite a bit as well.

long GS, GOOG

More Early Strength

Morning News of Note:
  • SBUX: STARBUCKS FRAPPS UP BANANAS Banana is the new flavor for Starbucks this summer. The coffee giant will offer a banana version of its blended Frappuccino drink throughout its North American cafés, a compnay spokesman told The Post. The flavor is similar to a line launched this month in New Zealand and Australia and inspired by the "flavors of the tropics," the company said. The drink is expected to hit U.S. stores in May. (Full Story) NY Post
  • GOOG: Google, U.S. Set For Court Face-Off Over Search Data Justice Department lawyers will press their case against Google Inc. today by arguing in federal court that consumer privacy won't be violated by the release of millions of company search records. The attorneys have alleged in court papers that none of the search queries and Web addresses they seek will be used to identify users of Google's Internet-search service. (Full Story) WSJ
  • AAPL: France Weighs Law Forcing iTunes Access Beyond Apple's iPod France is pushing through a law that would force Apple Computer Inc. to let consumers download songs from its iTunes online music store onto devices other than the computer maker's popular iPod player. Under a draft law expected to be voted on in parliament Thursday, consumers would be able to legally use software that converts digital content into any format. (Full Story) WSJ
  • US Oil: OPEC aims to keep US Oil price range of upper $50s, lower $60s-Reuters, citing the OPEC President.
  • Mad Money Summary: Cramer opened his show by saying that he is obsessed with fiber optical communications. With carriers like Verizon (VZ) and AT&T (T) spending a lot of money to build fiber optic networks, the component makers should see a lot of money. One such company is Avanex (AVNX), a $2 optical stock. Then Cramer discussed the aging population, and a company that will profit by making them look younger, AngioDynamcis (ANGO). The company treats varicose veins, a business that should continue to grow at 20% a year. Cramer also recommended Education Realty Trust (EDR), a real estate investment trust (REIT) that is cheap compared with its competitors and also attractive because of its 8.3% dividend. Cramer spoke briefly with Jai Nagarkatti, president & CEO of niche company Sigma-Aldrich (SIAL), a biochemical company which he feels is well diversified. In the Lightning Round, Cramer was bullish on Amgen (AMGN), Cephalon (CEPH), Inco (N), Concur (CNQR), Yahoo! (YHOO), Sara Lee (SLE), I-Flow (IFLO), Plum Creek (PCL), Las Vegas Sands (LVS), Schering-Plough (SGP), Bear Stearns (BSC), Grey Wolf (GW), Tellabs (TLAB), and Johnson & Johnson (JNJ), and was bearish on Celgene (CELG), Sirius Satellite Radio (SIRI), Google (GOOG), Medicine Co. (MDCO), Genitope (GTOP), and Orasure (OSUR).

Market Comments: The market is again bouncing in early trading. Yesterday I mentioned I was worried about this pattern, and sure enough the market sold off into the close. We still finished modestly positive, but it was far from the sort of follow-through day we are looking for. Maybe today will finish stronger, but we are setting up for a repeat of yesterday.

The brokers are higher after a blowout earnings report from GS. Housing stocks are doing better as bond yields are down 6 pbs to 4.71%. And energy stocks are mixed, despite continued sabre-rattling from Iran warning about how they will retaliate to any sanctions.

Yesterday, Fed pres. Yellen warned about the Fed going to far in their tightening campaign. On CNBC, Bill Gross seemed to echo these sentiments. I am also worried about this, due to the lag effect of rate hikes, and can only hope the FOMC pauses sooner rather than later.


Quote of the Day

"If you're given a choice between money and sex appeal, take the money. As you get older, the money will become your sex appeal." ~ Katherine Hepburn