Wednesday, May 31, 2006

Surging Into The Close

The markets looked like they might give up all of their early gains following the release of the FOMC minutes, but a strong rally in the final 20 minutes made for a relatively positive day.

Volume rose on the session, to above-average levels. This makes for an accumulation day. I hesitate to say it was the type of follow-thru day that I was looking for though. The SPX and COMP rose less than 1%, though the mid-cap and small-cap indexes rose +1.5% and +1.4%, respectively.

I think the late day strength smelled of month-end markups. As such, I would like to see some additional strength as further confirmation.

But it was still a solid day. Biotechs and energy were up the most (+2.4% each), followed by chips stocks which gained +1.8%. Housing stocks were the lone group in the red.

Oil finished flat, closing back above the $71 level. And the 10-year yield finished at 5.11%, up on the day. As for investor sentiment, the ISE Sentiment Index made a new 52-week low (89), and the CBOE put/call ratio was above 1.0 again for most of the day. So those are additional positives for this market, from a contrarian perspective.
'

Taking Some Trades

I am taking some money off the table in stocks I added over the last week or so. I am still keeping a lot of my longs, just closing out a few.

LQDT has rallied big since being profiled again in IBD late last week. The stock brokeout on huge volume last Friday, and has continued to climb yesterday and today. I took profits this morning, and will look to possibly get back in on some sort of pullback.

HWAY announced a merger this morning that was greeted bullishly by the street. The stock broke out to a new high. Although I usually like to hang on to stocks breaking out to new highs, this one was just a trade, so I elected to take profits.

And so you don't think I only highlight my winners, I was also stopped out on my CROX trade. I didn't keep as tight a stop as I would have liked, but elected to limit my loss to -15%.

I am continuing to look for new leadership, but so far I mostly see oil & gas stocks breaking out. The action in stocks like AAPL & GOOG today is pretty bearish. Tough market.

long GOOG

FOMC Minutes About As Clear As Mud

The FOMC minutes were just released, and the initial reaction from the market was a quick 30 point drop in the Dow. Of course, the market is already starting to bounce back. So by the time it closes today, it's anyone's guess where we will end up.

The FOMC said they discussed the full range of options, from no hike to a full 50 basis point one. The also said that inflation expectations are contained, and that forecasts for slower growth this year are not yet clear. Last, they said that rising price expectations could well reverse.

So basically there isn't much to glean from these minutes versus the previous commentary. The fed funds futures are now pricing the odds of a June hike at 65%. I think it will be more like 50% by the time the June FOMC meeting rolls around (end of June).

For its part, the 10-year yield is up today to 5.10%. It peaked 2 weeks ago at 5.19%.
'

Analyst Actions

Here are some upgrades/downgrads that caught my eye today:
  • TEVA: Am Tech ups from Hold to Buy ($46 tgt)
  • BOT: Keefe Bruyette ups from Underper. to Mkt. Perf.
  • FFIV: Citi ups from Hold to Buy
  • CBST: Lazard lowers from Hold to Sell
  • ASD: Deutsche lowers from Buy to Hold
  • GME: Lazard starts at Buy ($54 tgt)
  • KSS: Stifel starts at Buy ($68 tgt)
  • RBAK: UBS starts at Buy ($30 tgt)
  • CBST: RBC upds tgt from $25 to $33
  • LVS: Jeffries ups tgt from $80 to $88

Market Comments: The market continues to hang in. Oil is trading lower and nearing the $70 level. Semis are strong, with the BRCM/MRVL complex bouncing. One of my trading buddies just pinged me and said he thinks this rally will fizzle. I am hoping otherwise.

long KSS, RBAK

Market Gets A Bounce In Early Trading

Morning News of Note:
  • GS: Goldman Is Expected To Tap Blankfein as Leader With the departure of Chief Executive Henry Paulson Jr., Goldman Sachs is expected to turn to No. 2 Lloyd Blankfein -- replacing a classic, meet-and-greet investment banker with the sort of savvy trading manager who has been on the rise on Wall Street. Goldman's board of directors is expected to tap Mr. Blankfein, the firm's president, to succeed Mr. Paulson as soon as this week, according to people close to the firm. (Full Story) WSJ
  • Ethanol: Florida's sugar cane fields could become a major source of ethanol for fuel Deep green blades of sugar cane rise from the roadside approaching Belle Glade, growing in the shadow of refineries in western Palm Beach County. While local farmers will tell you sugar cane is far from the most lucrative crop, it nevertheless produces steady income because of its volume and resilience to dramatic swings in weather. (Full Story) Sun-Sentinel
  • VOD: Vodafone to Focus on Internet, Slow Expansion Vodafone Group PLC said it plans to expand into broadband Internet access and to slow the pace of international acquisitions, marking a strategic shift for a company that staked its reputation on being global and cellphone-focused. The new direction for Vodafone, the world's largest cellphone-service company by revenue, comes as Chief Executive Arun Sarin faces pressure from shareholders who are frustrated with stock-price declines and concerned about how the company will continue growing. (Full Story) WSJ
  • DIS: Disney films to be available for download from CinemaNow-Arizona Republic: Disney (DIS) and CinemaNow are expected to announce today that CinemaNow will sell computer downloads of Disney films, including "Glory Road" and "Chicken Little," for $19.95. The films will go on sale the same day they become available on DVD. They will also be able to be transferred to up to three portable devices
  • Mad Money Summary: Cramer opened his show discussing the Dow's drop of over 180 points. He said, "On the surface, this market looks completely incomprehensible, and that should scare you." He said the generals are dead, referring to former market catalysts Cisco (CSCO), Dell (DELL), Microsoft (MSFT), Intel (INTC), Broadcom (BRCM), Marvell (MRVL) and Google (GOOG). He also said General Motors (GM) and Wal-Mart (WMT) didn't have what it took to rescue the market. He recommended Clorox (CLX) as a good investment in the current "rudderless" environment. He also recommended Enbridge (ENB), which has the same upside potential as Kinder Morgan (KMI). Cramer also recommended Netgear (NTGR), a best-of-breed stock in the wireless sector. In the "Lightning Round," Cramer was bullish on Halliburton (HAL), URS (URS), ConocoPhillips (COP), Enbridge, Cedar Fair (FUN), Nektar Therapeutics (NKTR), Hain Celestial (HAIN), Comcast (CMCSA), Anheuser Busch (BUD), Pepsico (PEP), Bank of America (BAC), Citigroup (C), Crystallex International (KRY) and VeriFone Holdings (PAY), and was bearish on Maverick Tube (MVK), eBay (EBAY), Marvell Technology, Oil States International (OIS), Six Flags (PKS), XM Satellite Radio (XMSR), Sealy (ZZ), Falconbridge (FAL), SunOpta (STKL), Marshall & Ilsley (MI) and IndyMac Bancorp (NDE).


Market Comments: The market is getting a bounce in the first half hour of trading. This is positive only if it holds for the session. You know how skeptical I usually am of rallies near the open.

The Chicago PMI came in stronger than expected this morning (61.5 vs. 56.0 consensus). This caused a small pop in bond yields, which are still lower on the session to 5.08%.

The minutes from the last FOMC minutes will be released today, so you can expect some volatility to surface around then as traders will likely be hanging on every nuance contained in the minutes.

There is definitely a clear lack of leadership in this market right now. When this correction eventually runs it course, I think it will be interesting to see which group leads us out of the morass. That will likely be the group to look to for long exposure.

long GS

Tuesday, May 30, 2006

I Should Have Stayed In Cleveland

Did you catch that license plate? I woke up in Cleveland this morning well before the market opened. I hopped on a flight to LA with my 2-year old daughter (talk about a long flight!), thinking the market would likely hold up until I landed. Not!

I got to my office with an hour to go, and a sea of red staring me in the face. I pinged a couple of guys to get their takes on what happened, but it was pretty much just same 'ol, same 'ol.

The market got whallped today on higher volume also, making for another distribution day. I was looking for a follow-thru day early this week, but those plans might have to be put on hold. We shall see.

Breadth was awful, and the Hi/Lo index went back into triple digit negative territory (-104) on the NYSE, although it held up far better on the Nasdaq.

Big-caps (SPX) were down -1.6%, the COMP fell -2.1%, and small-caps (RUT) sank -2.5%. Pretty nasty.

Notably, investor anxiety surged. The VIX was up a full 31%! That's a big move. And the CBOE put/call closed at 1.20, another highly elevated reading. The ISE Sentiment Index fell near its 52-week low to 104. Over the weekend, the Market Vane bulls fell back to levels hit last October.

Tough to find a bottom in this market, but the oversold condition and highly bearish sentiment continue to have me looking to add long exposure.
'

Sunday, May 28, 2006

Weekly Recap

The previous weekly wrap concluded with "the fundamentals haven't tanked as much as the market." This, week, the market came to realize that, and found its footing.

The week opened with a continuation of the poor sentiment from prior weeks. The S&P opened sharply lower on Monday morning and even though it came off its worst levels, still closed with a loss of 5 points. There was no specific news to account for the decline. Anything remotely bearish could be ascribed as a factor, but it really was just poor sentiment. Underlying that was concern that the Fed would go too far in raising rates and that economic growth would slow significantly.

This thought process included some ridiculous talk that a decline in commodity prices was bearish for stocks because it reflected weak global demand. But the daily fluctuations in commodity prices are driven much more by speculative positions than daily changes in underlying demand from China.

The market was extremely volatile on Tuesday. The S&P was up more than 10 points in the morning but gave way to a late sell-off to end down another 5 points. There was again no real news that moved the market. Sentiment was the overriding factor, and that sentiment was mostly about fear. That even included highly suspect worries about the impact of avian flu.
Wednesday was another very volatile day with one exception - the S&P closed with a 2 point gain. A more positive tone was supported by a surprising increase in April new home sales. This helped ease fears about the economic outlook.

Thursday the market rocketed higher. The S&P gained 14 points. Press reports ascribed it in part to an upward revision to first quarter real GDP to 5.3% from an originally reported 4.8% and an unchanged price deflator. Again, however, it was not so much the actual data as that fears were being squeezed out of the market on numbers that were largely in line with expectations.

That was the case on Friday as well. The April core personal consumption deflator (PCE) was up 0.2%. That was in line with expectations. It pushed the year-over-year increase in this closely watched inflation measure to 2.1%, up from 2.0% in March. That is above the Fed's forecasted range of 1 3/4% to 2% for all of 2006. There was nothing particularly bullish about the data. It also later became widely known that the increase was actually 0.249%. A slight fluctuation in one component and it would have been a 0.3% gain.

No matter. The market was comforted by the as-expected 0.2%, and the S&P gained another 6 points on Friday.

For the week, the fundamentals were little changed. The economic data was mixed. April durable goods orders on Wednesday were weaker than expected while new home sales were stronger than expected. Thursday brought the GDP data noted above and an as-expected dip in existing home sales. The core PCE deflator data was released on Friday.

There were very few earnings reports, and none of broad impact. The yield on the 10-year note dipped to 5.05% from 5.12%. Oil rose to $71 a barrel from $69 a barrel. And, despite all the talk about implications for Fed policy of every bit of news, fed funds rate futures barely moved. They still incorporate expectations of one more quarter-point rate hike this year. All in all, the news was mixed at best.

Yet, the market tone went from decidedly bearish at the start of the week to neutral or even a bit upbeat by the end of the week. This was due to the fact that the worst fears were taken out of the market. The economy isn't about to hit a wall, and earnings growth will be at least decent through year-end. Inflation may be firming a bit, but not tremendously. The Fed may have to raise rates again, but probably just one more time.

The fear that the Fed may go too far, drive the economy into the ground, and completely ruin the stock market outlook, has eased considerably.

-- Briefing.com

Friday, May 26, 2006

Heading Out For The Weekend

The market is pretty flat to up slightly so far this morning. The brokers are strong after a string of analyst upgrades. Biotechs are also continuing their bounce.

LVS won a bid for a Singapore resort, and the stock is spiking.

CROX raised guidance last night, and the stock was up huge after hours, but the enthusiasm has faded today.

Breadth is positive, and new highs have overtaken new lows on the Nasdaq. The 10-year yield is lower by 2 basis points to 5.05%.

I am leaving to jump on a plane to Cleveland. Keep the market strong for me, and I'll catch up after the close.

Thursday, May 25, 2006

The Bounce-- Better Late Than Never

Now we're talking. The late day surge in stocks is more along the lines of what I had been looking for. If the market doesn't pull back, I think it could catch even more bears short, and offer a nice squeeze higher.

Stocks rallied almost across the board, save for the semis. Small-caps led the way, up +2.0%. Large-caps were up +1.1% and mid-caps +1.2%. By sector, energy stocks spiked higher by +3.5%, brokers were +2.4%, and biotechs were +1.9%. But the lowly semis were down -0.4%.

Volume was not as high as yesterday, which was expected. I would still like to see a high volume follow-thru day early next week. Breadth was solid, with more than 80% upside volume. But new lows still exceeded new highs.

Measures of investor anxiety fell today, but things like the put/call ratio still have a long, long way to go to unwind all of the built up pessimism. The AAII figures came out today, and showed an increase in bearishness (even more bears than bulls).

Still not too late to add longs here. I will be back with some notable stocks in a bit.
'

Semis Acting As Dead Weight

We are getting a nice bounce today, but the semis are not participating. BRCM and MRVL act very heavy, and I have reduced my exposure to the group.

If we could get the semis to rally, I think the market would head even higher. Also, energy stocks are rallying again, with oil back at $71. But if oil keeps heading higher, that could weigh on the overall market as well. So it's a bit of a balancing act.

Brokers and biotechs are strong today also. GOOG just announced a big deal with DELL, where it will have its search software preinstalled on millions of PCs. This is big news, but the stock is still down. In a better environment, this type of news would send the stock up double-digits.

The put/call ratio is running at a still elevated 0.90. But the VIX/VXN have turned down. Makes me think there is still ample room to rally.

long GOOG

1Q GDP Revised Higher

Morning News of Note:
  • MSFT: MSN Is in Talks To Buy Provider Of Wireless Ads In a sign that the nascent market for advertising on cellphones is gaining momentum, Microsoft Corp.'s MSN unit is in talks to acquire a small private company that provides ads for the wireless Web sites of several major content providers, say people familiar with the situation. Acquiring Third Screen Media, whose clients include USA Today and The Weather Channel, would give MSN immediate access to technology that serves up ads on cellphones, as well as a network of relationships with leading advertisers. (Full Story) WSJ
  • C MA JPM: Credit-Card Issuers' Problem: People Are Paying Their Bills The credit-card industry has a problem: Although Americans are deeper in debt than ever, they are paying off bigger portions of their monthly credit-card bills. For card issuers, which profit by collecting interest on unpaid balances, that's bad news. In the past, when interest rates crept up, as they are doing now, fewer cardholders could afford to pay down balances. (Full Story) WSJ
  • Stock-Options Probe: Heard on the Street... Analysts Dig for Clues Amid Options Inquiries As investigations into stock-option practices heat up, investors are being inundated with a flood of reports from analysts looking for companies that may come under the microscope. The methodologies behind the studies vary, making it difficult to independently verify the conclusions. Still, shares of some companies are suffering even though there isn't any indication that they acted inappropriately. Others are tumbling, though the abuses might not affect their businesses. So some investors, rather than shying away, are trying to figure out if the scrutiny is creating some bargains. (Full Story) WSJ
  • WiMAX: Digitimes reports Chunghwa Telecom, Alcatel Taiwan and First International Telecom expressed their concerns about promoting WiMAX in Taiwan, at a strategic forum on May 24 in Taipei. Issues raised at th forum included regulation, competition between WiMAX and 3G services, operators' return on investment and the cost of WiMAX infrastructure. The forum focused on new business opportunities expected to be generated by the government-promoted Mobile Taiwan (M-Taiwan) Program, for which WiMAX is one of the target technologies. Duei Tsai, deputy chief of the Ministry of Transportation and Communications, indicated at the forum that the technological development of WiMAX is feasible in the view of equipment suppliers, service operators and promotional retail channels, but the lack of a customer-oriented business model for the whole supply chain currently constitutes the key risk
  • Mad Money Summary: Cramer opened his show last night evaluating oil plays. "Expensive oil is here to stay and is not going away any time soon," he said. He recommended National Oilwell (NOV), Nabors Industries (NBR), Rowan (RDC), and GlobalSantaFe (GSF). He also liked drill bit maker Smith International (SII), drill pipe maker Grant Prideco (GRP) and wellhead equipment/blow-out preventer Hydril (HYDL). He then recommended oil industry players Amcol (ACO), Weatherford (WFT), Superior Energy Services (SPN), FMC Technology (FTI) and Tetra Technologies (TTI). "You now have a quality company for each step of the oil business," he said. In the "Lightning Round," Cramer was bullish on Microsoft (MSFT), Pantry (PTRY), Valero Energy (VLO), Nordstrom (JWN), Abercrombie & Fitch (ANF), Qwest (Q), Southwestern Energy (SWN) and Eastman Chemical (EMN), and was bearish on XM Satellite Radio (XMSR), Delek (DK), Carpenter Technologies (CRS), NYSE Group (NYX), Level 3 Communications (LVLT), and Eastman Kodak (EK).


Market Comments: The market is trading higher so far this morning, as 1Q GDP was revised higher to +5.3%. While this is higher than the initial reports of +4.8%, it is actually below expectations for revisions to get up to +5.8%. But what is a few basis points between friends?

The inflation components of the report were mild, with core PCE rate unchanged at +2.0%. This is within Bernanke's comfort zone, and should not spook the markets.

For its part, the bond market is relatively flat, with bond yields at 5.04%.

Chip stocks are extremely weak, as the selling there has been relentless. I am hearing that this whole options scandal might be a bigger deal that at first blush, and that some of the chip companies could get dragged down by it.

long C, MSFT

Wednesday, May 24, 2006

Sentiment Check

Here is how the sentiment indicators closed today:

The VIX/VXN volatility complex closed lower today, likely indicating that these have peaked.

The CBOE put/call ratio closed at 1.42, another huge number. It has now closed above 1.0 for 9 days in a row. That has pushed the 10-day average to another record high at 1.22.

The ISE Sentiment Index closed near a 52-week low at 106, representing heavy put buying. The 10-day for this indicator is down to 139, which is below levels hit in October 2005.

I continue to hear from too many managers that are justifying these figures by pointing to increased program trading, or a host of other reasons why they aren't meaningful. Only time will tell, but I suspect we will look back at these readings and say what a great buying opportunity it was.

Nice Reversal Day

After plunging midday, the markets were able to find some footing and rally into the close. The gains were small, but at least we finished in the black.

The SPX gained +0.2%, COMP +0.5%, while the MID returned -0.2% and the RUT (small-caps) was flat.

Biotechs got a much needed bounce, with AMGN having a nice day. Technology stocks fared pretty well also, with MSFT up nicely and bucking the weakness most of the day.

If you go back to Friday, I said that I expected to see a confirmation rally this week. What I did not expect was for the market to undercut Friday's low in the interim. So while I would like to call today the follow-thru day, we technically need to consider it as Day 1 of a new rally attempt. Thus, we need to look for another follow-thru rally early next week for confirmation.

I'll be back with close sentiment figures in a bit.


long AMGN, MSFT

Last Leg Down?

The market is swooning again, unable to find its footing.

Measures of investor anxiety are spiking again. The volatility indexes (VIX/VXN) are sharply higher, and the CBOE put/call ratio is again well over 1.0 (1.29).

This is the 9th consecutive day that the put/call ratio is running above 1.0. I have talked with many investment managers who are downplaying its significance. I am taking the other side of that trade, and think that it is a meaningful sign of a peak in short-term bearishness.

Combined with the deeply oversold market conditions, I think this bodes well for a strong bounce very soon.

Will The Early Lift Stick?

Morning News of Note:
  • CYMI: With semiconductor sales growing at a healthy clip, so too is demand for the gear used to make them. The latest upturn in the chip cycle started around mid-2005 and has gained steam this year. In the first quarter worldwide sales grew 7.3% from the prior year to $59.1 billion, says the Semiconductor Industry Association. The group's November forecast sees this year's annual sales up 7.9% to $245.5 billion. (Full Story) IBD
  • DELL: Dell Plans to Open Pilot Stores, But Orders Stay on Phone, Web After years of resistance, computer maker Dell Inc. plans to open two pilot retail locations. The company is known for relying on orders placed by phone or on the Web. In recent years, the Round Rock, Texas, company has opened about 160 kiosks in U.S. shopping malls, to let customers see and try out some Dell products, though they must still place purchase orders electronically while at the kiosk or at home. (Full Story) WSJ
  • C: Financial Times reports the co is in talks with China Life (LFC) and other Chinese companies about joining its bid for a controlling stake in Guangdong Development Bank, after the central govt refused to relax foreign investment rules for the sale. Having a powerful partner such as LFC, the country's largest life assurer, would help the co stay in the race for debt-laden GDB, the first Chinese bank to offer a majority stake to a foreign-led consortium. However, it is unclear whether the co will succeed in striking an agreement with LFC, with which it has been in discussions for some weeks. The co, which originally bid for 85% of GDB together with US buy-out fund Carlyle and a state-owned food company, had planned to take a 40% stake in GDB itself as part of the deal. But the bid breached China's existing rules governing overseas stakes in local banks, which set a ceiling of 25% for all foreign investors and 20% for a single entity
  • COP: ConocoPhillips-COP in refinery deal with Saudi Arabia: The Saudi Arabian Oil Company and ConocoPhillips signed a comprehensive Memorandum of Understanding to conduct a detailed evaluation for the proposed development of a 400,000 barrel-per-day, full-conversion refinery in Yanbu, Saudi Arabia
  • Mad Money Summary: Cramer opened his show discussing his top five buyback stocks. The fifth was Nokia (NOK), the fourth was a tie between CBS (CBS) and News Corp (NWS), the third was a tie between Bank of America (BAC) and Citigroup (C), the second was Chevron (CVX), and the first was Sears (SHLD). Then Cramer declared bird flu dead and said it's time to buy chicken. He recommended Sanderson Farms (SAFM). Marketwatch columnist Herb Greenberg then came on the show and challenged Cramer's "love affair" with Sears. Greenberg was concerned that Sears 10-Q filing was not released with its earnings, which Cramer brushed off. Both Greenberg and Cramer agreed that it was best to avoid United Online (UNTD). Cramer then discussed CACI International (CAI), which he said was a takeover target for BAE Systems and has solid financials. In the "Lightning Round," Cramer was bullish on Baidu.com (BIDU), Yahoo! (YHOO), Con Edison (ED), VeriFone Holdings (PAY), Immucor (BLUD), Freeport-McMoRan Copper & Gold (FCX), Kinder Morgan (KMI), BE Aerospace (BEAV), Brocade (BRCD), Finisar (FNSR), JDSU (JDSU) and Crystallex International (KRY), and was bearish on Alliant Energy (LNT), Dynamic Materials (BOOM), Suntech Power Holdings (STP), Sirius Satellite Radio (SIRI), MDU Resources (MDU), Elan (ELN) and Allegheny Technologies (ATI).


Market Comments: Lots of crosscurrents this morning. The 10-year yield plunged on the weak durable goods report (-4.8%), but then bounced back on a stronger than expected new home sales report. Interestingly, the yield also bounced off of its 50-day average.

Stocks opened a bit weak, but quickly reversed and are trading higher. Semis are getting a nice bounce, as well as biotechs and homebuilders.

MDT reported solid earnings last night, and the stock looks like it may have put in a bottom.

GOOG is also trading higher, after RBC said that the weakness they were worried about does not look like it is going to materialize, and they would be buyers at current levels.

long GOOG, MDT

Tuesday, May 23, 2006

The Bounce That Fizzled

Well that certainly took the steam out of the bulls' sails, at least for now. The market started to selloff in the last hour, and by the close had given up fully all of its gains and then some.

Maybe the negative reversals I highlighted in my last post were good "tells" of what the overall market was heading towards. Semis led the downside, shedding -1.6%. Housing and energy stocks held up the best, including commodity stocks, which were mostly higher.

Volume ran below yesterday's levels, so it wasn't a distribution day. Breadth was slightly negative, and this will only serve to push the markets deeper into oversold territory. When this market finally bounces, I think it could be suprisingly strong.

I am still looking for a strong follow-thru rally this week. The put/call ratio was again above 1.0, pushing the 10-day moving average to multi-decade highs. I don't know anyone who is paying much attention to this. Some of my colleagues are saying, "It's just hedging, as opposed to outright bearish bets."

Regardless, those option plays represent real money. And when and if they start acting like dead weight in portfolios, their unwinding will create upside pressure on the market.

Can't happen soon enough--

Seeing Some Weakness in Tech

The market has pretty much held on to its early gains. But there is some weakness, mostly in tech and semis. Energy stocks are still up the most, and the commodity stocks are getting a strong oversold bounce.

Some of the tech stocks I am watching are fading:

RBAK broke to a new high this morning, but has since reversed into negative territory.

STX broke above its 50-day earlier, but has also reversed into the red.

TXN has also had a negative reversal today, trading near the bottom of its intraday range.

Maybe some of these stocks can rally into the close. But it's not a great sign of strength. I hope these stocks can pick up some sponsorship if this rally builds.


long RBAK, STX

Now That's A Bounce

Morning News of Note:
  • American Tower receives subpoena from US Attorney for the Eastern District of New York regarding stock option matter (AMT) 29.61 : Co announces that it received a subpoena from the office of the US Attorney for the Eastern District of New York requesting documents related to the cos historical stock option practices.
  • Toll Brothers beats by $0.03; lowers FY06 guidance (TOL) 26.90 : Reports Q2 (Apr) earnings of $1.06 per share, $0.03 better than the Reuters Estimates consensus of $1.03; revenues rose 16.7% year/year to $1.44 bln vs the $1.45 bln consensus. Co issues lowers guidance for FY06, to EPS of $4.69-5.16 from $4.77-5.26 vs. $4.93 consensus.
  • Hansen Natural signs Mexican distribution agreement (HANS) 178.34 : Co announced that it has signed a distribution agreement with Cadbury Bebidas, S.A. de C.V. for distribution of Monster Energy drinks in Mexico. Additional terms were not disclosed. "Cadbury Bebidas is a professionally managed and well established company with extensive distribution arrangements throughout Mexico. Cadbury Bebidas currently distributes well known beverage brands throughout Mexico, including Penafiel, Clamato, Squirt, Dr. Pepper, Crush, Snapple and other Cadbury Schweppes brands."
  • Varian Medical receives FDA 510k clearance on New Trilogy Tx and Trilogy Treatment Machines (VAR) 46.33 : Co announces it has received FDA 510(k) clearance that permits the use of the company's high-energy, ultra-precise Trilogy linear accelerators on an expanded range of medical conditions. The clearance also marks the introduction of Varian's new Trilogy Tx Image-Guided Radiosurgery model designed specifically for surgeons.
  • Johnson & Johnson: ALZA Corp receives FDA approval for IONSYS; first needle-free, patient-activated analgesic system for acute postoperative pain (JNJ)


Market Comments: The market is getting a very strong bounce at the open. The best case would be for the market to build on its early gains throughout the day, and not give a good entry point for those sitting on cash, or shorts looking to cover.

The put/call ratio again opened above the 1.0 level, another good sign. And if bond yields begin to ease again today, that would be an additional positive.

Energy stocks are getting a nice bounce, followed by brokerage stocks and also tech. Small-caps are also strongest out of the gate so far.

long JNJ

Monday, May 22, 2006

Modest Strength Into The Close

The market was weak most of the day, but did embark on a spirited rally in the last hour. The SPX climbed its way back into positive territory, from a greater than 1% decline, but finished the day down -0.4%. The mid-caps (-0.8%) and small-caps (-1.0%) lagged their large-cap bretheren.

Utilities were the strongest today, as bond yields fell briefly below the 5.0% level. Chip stocks were hit the hardest (-4.2%), but I expect them to experience a strong bounce this week.

Despite today's declines, volume levels were modestly lower. So Friday's initial rally attempt is still intact, and I expect to see some follow-thru days this week. Breadth was fairly negative today, which is just pushing the oscillators/stochastics further into oversold territory.

Also, measures of investor anxiety rose again today, with a sharp spike in the volatility indexes. The fact that more market strategists aren't rushing to call this a great buying opportunity actually makes me a bit more emboldeded.

Investor Anxiety Peaking

The CBOE put/call ratio is again above the 1.0 level. According to my data, the 10-day put/call moving average is at its highest levels (1.11) in over 10 years!

My colleague Scott Rothbort notes this morning that implied volatilities are hitting their highest levels (vs. 200-day averages) since the market bottom in October 2002.

Also, the AAII bull/bear survey is back at negative levels (more bears than bulls). And the Rydex Nova/Ursa ratio is at a multi-year low (0.11) as well. My sense is that the bears are overplaying their hand here, and if this market turns higher, there could be a flurry of short covering.

And this coincides with a market that is heavily oversold, technically.

Friday's action showed a strong reversal on higher volume. So that's a good sign. If this market is going to bounce, we should see a strong follow-thru day somethime this week.

Monday Morning Musings

Morning News of Note:
  • VLO: Valero Says Gasoline Output Isn't Likely to Be Hurt by Blast Valero Energy Corp. was investigating damage to an oil refinery outside New Orleans after an explosion Saturday night, though a spokeswoman said it was unlikely gasoline production would be affected. No workers were injured in the blast at a diesel-processing unit at the Valero facility, which has a refining capacity of 250,000 barrels a day. (Full Story) WSJ
  • HD: CEO Pay: Showdown Looms At Home Depot Sparks could fly at Home Depot Inc.'s annual meeting Thursday as Chairman and Chief Executive Bob Nardelli squares off against labor unions and shareholders incensed by his multimillion-dollar paydays. Mr. Nardelli has come under intense criticism because Home Depot shares have slid 11% since he took the helm in 2000, while shares of archrival Lowe's Cos. have nearly tripled. (Full Story) WSJ
  • TIVO: TIVO TAKING TUNE FROM MAG EDITORS TiVo is partnering with several magazines, including Sports Illustrated and Star, to offer viewers virtual TV channels with content hand-picked by magazine editors. The move is another step for TiVo in its effort to offer new features in the face of competition from other digital video recorders, or DVRs, that simply allow users to record and store programming. (Full Story) NY Post
  • GPS: RETAIL GIANT MULLS LAUNCHING WEB SHOE STORE The Gap Inc., which operates under the Gap, Banana Republic, Old Navy and Forth & Towne brands, is considering launching a fifth division, The Post has learned. Unlike the other four, which sell their own branded merchandise in retail stores and on the Web, the new division would exclusively be an online store selling shoes made by other companies, similar to Nordstrom.com and Zappos.com, sources said. (Full Story) NY Post
  • Mad Money Summary: Cramer opened his show on Friday night discussing the drop in the markets at length. He said to this of this past week as a huge sale. He then suggested five diversified stocks that "really got killed." He said to look at Freeport-McMoRan Copper & Gold (FCX), Halliburton (HAL), JPMorgan (JPM), Tellabs (TLAB), and Boeing (BA). Cramer then recommended a natural gas play, Georgia Gulf (GGC). In the "Lightning Round," Cramer was bullish on Peabody Energy (BTU), Gymboree (GYMB), Essex Corp (KEYW), Smith & Wesson (SWB), Hain Celestial (HAIN), Whole Foods (WFMI), Disney (DIS), Lowe's (LOW), Centerpoint Energy (CNP), H&E Equipment Services (HEES), Cerner (CERN) and Starbucks (SBUX), and was bearish on United Natural Foods (UNFI), Home Depot (HD), Playboy (PLA), Sony (SNE), Burger King (BKC) and Chipotle (CMG).


Market Comments: The market is opening under severe pressure this morning, following weakness in overseas markets. The Indian stock market fell 10% overnight before being halted for trading. It pared those declines to finish down -4.2%.

Bond yields continue to decline (5.0%), but it has yet to really take hold in the equity markets. The air continues to come out of the energy and commodity stocks, and that seems to be weighing on the markets as this former area of leadership gets liquidated.

I saw some spikes in bearish sentiment last week, which when combined with this oversold market, lead me to believe that a strong bounce is imminent. I think stocks will finish higher this week, and plan to do some buying.

Sunday, May 21, 2006

Lowering Your Summer Energy Bill

Here is an article from SmartMoney.com about slashing your summer energy costs:


KEEPING YOUR COOL during the summer heat can be expensive.

Typically, the average household spends $1,400 a year on electricity and gas, according to the Environmental Protection Agency. But you can expect that amount to jump this year — by as much as 120%, warns Kateri Callahan, president of the Alliance to Save Energy.

But there's no need to resign yourself to spending the dog days of summer hiding out at the nearest mall or movie theater. There's plenty you can do now to significantly cut your summer energy bills. These nine tricks can save you 30% or more:

Upgrade to energy-efficient appliances. If you're in the market for a new air conditioner, refrigerator or even windows, consider the energy-efficient versions. Air conditioners with the Energy Star label, for example, must use 10% less energy than conventional window models.
Granted, energy-efficient appliances are still somewhat pricier than the regular versions, but thanks to federal tax credits and increasingly competitive prices, that initial purchase price is becoming more attractive. Consumers who purchase energy-efficient windows, for example, are eligible for a one-time tax credit for 10% of the cost, up to $200.

For more, see Energy Efficient Home Upgrades.

Be a night owl. If your electrical supplier offers a time-of-use plan, reserve energy-hogging chores — say, running the dishwasher or doing laundry — for off-peak hours, advises Anne Dalton, a spokeswoman for the New York State Public Service Commission, which oversees utilities. These widely available plans charge you different rates per kilowatt hour. Price differences for on-peak and off-peak usage may only be a cent or two during the winter, but summer savings can be substantial.

Wisconsin Public Service, an electric and gas supplier that serves parts of Michigan and Wisconsin, estimates that consumers can save 15% on their monthly bill. You'd pay about three cents per kWh during off-peak times (7 p.m. to 9 a.m. on weekdays, and all day on weekends and holidays), compared with 12 cents per kWh during peak times. Contact your power supplier for information about its time-of-use rates and hours.

Get with the program. Your programmable thermostat, that is. How cold you keep your home is a personal preference, says Jennifer Thorne Amann, senior associate at the American Council for an Energy-Efficient Economy, a nonprofit that advocates energy efficiency — but try to set it 10 degrees warmer when you're not at home. "For every degree you let the house warm up, you can save 2% to 3% on your energy bill," she says.

Use fans. You may find you don't need to use the air conditioner at all, says Urvashi Rangan, a senior scientist and policy analyst at Consumer Reports' Greener Choices. "Ceiling fans can make a room feel six to seven degrees cooler," she says.

Clean up. A dust-free appliance works more efficiently, says Callahan. Clean your air conditioner filters and coils every month. "When filters get clogged, they impede the flow of air," she says. And that makes your appliance work harder to maintain its output. While you're at it, take a vacuum to the dust collecting on your refrigerator's coils, too, suggests Rangan.

Blow off steam. Chances are, you really aren't excited about scalding summer showers. Lower your hot water thermostat to medium heat, or 120 degrees. Your boiler will use less energy, and less heat will escape from the device into your nicely cooled home. That's a savings of about 10% off your bill, says Rangan.

Green your yard. Doing some landscaping gets you two kinds of green: the kind that you put in your wallet and the kind that makes your yard lovely to look at. Drought-resistant perennials, shrubs and trees use significantly less water — which can cut your bill by 50%, according to Consumer Reports. And leafy trees can shield the house from direct sunlight, keeping temperatures down, while still permitting sunlight to hit your house during the winter months. Planting just three shady trees can knock $100 to $250 off your annual heating and cooling costs, according to the Department of Energy. For more, see our column Cheap Landscaping Tricks.

Seal it in. It's easy to find a leak in the winter, says Amann — the freezing draft in your otherwise warm house must be coming from somewhere. Leaks are harder to find in the summer, but you don't want your pricey, cooled air dissipating into the mid-July swelter. Sealing leaks can save you anywhere from 5% to 30% on your monthly bill, according to the Department of Energy. To spot them, conduct a home energy audit. You can do this yourself or hire a professional. For references, contact your state energy office.

Free your outlets. Just because an appliance is turned off doesn't mean it's not using any energy, says Rangan. A major culprit: chargers for cellphones, MP3 players and other devices. Unplug those when you're not using them to charge a device. Keeping your computer on all day would rack up an additional $88 per year on your electronic bill, according to GreenerChoices.org. Putting it on sleep mode or shutting it off when not in use could cut that expense by 80%. Other energy-sucking appliances include televisions, VCRs, DVD players, stereos, and microwave ovens. When you go away on vacation, unplug the appliances that don't need to stay connected while you're away.

Weekly Recap

The market went from looking at everything in a positive light to looking at everything in a negative light in a couple of weeks. The week ended May 12, the S&P dropped 34.52 points (2.6%). The catalyst was the Fed policy statement, which did not indicate that the Fed was done raising rates.

This week, the S&P dropped 24.21 points (1.9%). The catalyst was a single extra 0.1% on an inflation measure. On Wednesday, it was reported that April core CPI (total consumer inflation excluding energy and food) was up 0.3%. A gain of 0.2% had been expected. The slight miss led the S&P to plunge 22 points that day. No one is arguing that inflation is picking up sharply, but even a slight uptrend is considered dangerous to the financial markets at this time.

This was the second straight monthly increase in the core CPI of 0.3% and it pushed the year-over-year increase in this measure to 2.3% in April from 2.1% in March. That is above the Fed's forecast of 1 3/4% to 2% for core inflation for all of 2006. It is therefore assumed to be higher than the Fed will tolerate. If the core CPI continues to firm, there will be fears that the Fed will have to raise rates further to curtail demand, even if that means slowing down the economy significantly.

That puts second half of the year earnings forecasts at risk. Current estimates are for over 10% earnings growth. But the market action suggests that investors are questioning whether that can occur.

Everything negative gets play now. The weak dollar is perceived as a negative for stocks. Anything remotely inflationary gets top billing. Earnings estimates are in question. Weak economic releases create anxiety about the state of the economy. There is even talk that a correction of 10% could be in the offing.

Just a few weeks ago, the conventional wisdom was that interest rates were peaking soon enough to allow economic and earnings growth to continue strong. The fashion in the market has changed completely.

The market may in fact continue to struggle in the weeks ahead. The "sell in May and go away" seasonal factor can be self-fulfilling. The market has historically struggled over the summer months and that can create caution.

Money market rates are also a factor. Investors can now get 5% or more from CDs. The S&P is up just 1% so far this year and was up 3% last year. Those safe money market yields will appeal to skittish investors.

It is not all bleak, however. The price/earnings ratio for the S&P 500 in aggregate for operating earnings is only 15.8. The price/earnings ratio on as-reported earnings is 17.4. Those are very reasonable considering that economic momentum is still good. Real GDP and earnings growth are slowing, but not ending.

The other news this past week had little influence once the CPI data shifted underlying sentiment, even though much of it was upbeat. Oil prices declined to end the week at $69.29 a barrel. The yield on the 10-year note dropped to 5.04% from 5.18% at the end of the prior week.

The April core PPI was up a less than expected 0.1%. Other economic releases leaned bullish as well. Housing starts were down, but industrial production was up a strong 0.8% for April, and May surveys showed manufacturing remained strong this month.

Earnings reports were mixed. Wal-Mart and Home Depot had decent reports, but there are concerns about the outlook for consumer spending given high gas prices. Deere and Hewlett-Packard had good reports. Dell came in as they said they would after a recent warning announcement.

The market will be keyed to any and all inflation indicators in the weeks ahead. Economic data will be important. Over the short term, however, the psychological factors are critical. The market is looking to find a bottom so that the heavy pessimism wears off, just as the optimism of a few weeks ago did. The sell-off the past two weeks is warranted as an adjustment to the realization that the Fed will raise rates further and that there are some inflationary pressures.

The reality, however, is that the fed funds futures are still only priced for one more rate hike, and that the core CPI was only up 0.1% more than expected. Inflation isn't surging. It was another very bad week, but the fundamentals haven't tanked as much as market sentiment.


- Briefing.com

Friday, May 19, 2006

Looking For A Strong Close To A Weak Week

Morning News of Note:
  • High End E-Commerce: Fashionably Late? Designer Brands Are Starting To Embrace E-Commerce Far from the chic avenues of Paris, one of Christian Dior's most successful French boutiques has a much more mundane address: www.dior.com. Six months after Dior launched its French online boutique, the Web site is quickly becoming one of the company's fastest-growing points of sale in its key domestic market. (Full Story) WSJ
  • DIS VIA: There's Gold in the Vault THE RESULTS OF THIS WEEK'S "upfront" TV-ad buying spree suggest television broadcasters have their work cut out for them: They will likely generate no growth in ad revenue this year as advertisers flock to the Web. But all is not lost. New forms of digital content distribution such as iPod downloads, streaming video on the Internet, and cable video-on-demand could yet bring a windfall to television and film conglomerates such as Walt Disney and Viacom. (Full Story) BARRONS
  • DELL AMD INTC: Dell's Decision to Use Advanced Micro Chips Is Blow to Intel Dell Inc.'s decision to end its 22- year exclusive use of Intel Corp. computer chips marks the biggest victory for Advanced Micro Devices Inc. in its battle to take market share from the world's largest chipmaker. Shares of Advanced Micro surged after Dell, the world's largest personal-computer maker, yesterday said it will use Sunnyvale, California-based Advanced Micro's Opteron processor in some server machines. Intel slumped. (Full Story) Bloomberg
  • Commodities: Speculative premium on commodities about 50% above fundamentals -- Globe and Mail: The Globe and Mail (Canada) cites a report by Merrill strategist Richard Bernstein that suggests commodity prices at the end of April were about 50% above where they would be if based solely on fundamentals. Story says that at the end of March, the speculative premium was at 30%, already the largest premium in the history of his data. With such a high premium built into commodity markets, story suggests that liquidity is driving pricing. Bernstein is quoted as saying, "It should be no surprise, therefore, that commodities have recently fallen as the fed funds futures markets have started to discount a higher probability of a Fed tightening."
  • Mad Money Summary: Cramer opened his show by praising Qwest Communications (Q), saying it is a "textbook comeback story" and no one realizes it yet. Cramer then noted that both Dell (DELL) and Advanced Micro Devices (AMD) moved higher on the news that Dell was switching from Intel (INTC) chips to AMD chips. Cramer then discussed Sears (SHLD), which he says is one of the best stocks out there. "It's a $200 stock masquerading as a $150 stock," he said. Cramer then spoke to L-3 Communications (LLL) CEO Frank Lanza about the company's recent acquisition of TRL Electronics. Cramer said L-3 is one of his top defense picks. In the "Lightning Round," Cramer was bullish on TD Ameritrade (AMTD), Crystallex (KRY), Anglo American (AAUK), Joy Global (JOYG), Terex (TEX), Deere (DE), Caterpillar (CAT), Baidu (BIDU), The Pantry (PTRY), Texas Roadhouse (TXRH) and Schlumberger (SLB), and was bearish on E*Trade (ET), Select Comfort (SCSS), Sirius (SIRI), Wind River Systems (WIND), Goldcorp (GG), CBOT Holdings (BOT), AMR Corp (AMR), Netease (NTES), Expedia (EXPE) and Ruddick (RDK).


Market Comments: The market is again opening on a strong note. Yesterday, we saw this early strength fade by the close. This is why I usually prefer weak openings. Let's see if the market can hang on to its early strength today.

Bond yields continue to fall, with the 10-year dropping to 5.04% currently. Recently, it was as high as 5.20%. Copper plunged this morning, and was limit down in the futures markets. The air coming out of commodity prices should help ease inflation concerns.

The put/call ratio opened above 1.0 again this morning. There has been a ton of puts purchased in the last week. If the market can turn higher, these positions will quickly be under water and excert additional upside pressure on the market. But for the time being, the put buyers have been right.

Semis are getting the strongest bounce so far, after some positive news for AMD and MRVL. Biotechs are down again, as are most energy and commodity stocks.

long INTC, MRVL

Friday Humor

A reporter is interviewing a 104 year-old woman:

"And what do you think is the best thing about being 104?" the reporter asks.

"No peer pressure," the woman replies.
'

Thursday, May 18, 2006

After Hours Movers

MRVL reported earnings 2 cents ahead of estimates. Revenues grew +43% yr/yr. The stock, which has sold off hard lately, is currently trading $3 higher.

DELL reported in-line earnings, and it's stock is trading about $0.75 higher. They also said they would start using AMD chips in servers, which is really boosting AMD stock and weighing on shares of INTC.

CTRN beats earnings by $0.11 and raises guidance for FY07. Revenues rose +44% yr/yr. The stock is trading roughly $2 higher after hours.

FMCN beat by 8 cents, and also guided Q2 revenues higher. Their revenues rose +246% yr/yr. And the stock is up $2 after hours.


long INTC; net long MRVL

The Elusive Bottom

Stocks sold off hard in the last hour of trading. I heard a lot of people scrambling to come up with reasons why, but the truth is that no new news hit the tape late in the day. So it was just additional selling pressure that hasn't been fully worked off yet. It also could have been exacerbated by options expiration tommorrow.

Breadth was again negative, and the markets are that much more oversold as a result. But measures of investor anxiety spiked again today, which I think is helping to build what will be a tradable bottom.

Volume was not as heavy today, so we avoided another distribution day. Small caps sold off the most (-1.0%), with the SPX falling -0.7%. In terms of sectors, biotechs were hit hardest (-2.1%) while retailers (+0.9%) and homebuilders (+0.1%) were actually up on the day.

Market bottoms are painful processes, but they are a normal occurrance in the market. It is what it is. With the Nasdaq and Russell 2000 now down more than 8% from their highs, this has been a quick and powerful correction.

Standout Stocks

Here are some stocks making notable moves today on high volume:
  • OII: bounces on Mad Money mention, and large contract signing
  • AP: spikes to new highs after bouncing off 20-day
  • ZUMZ: positive reaction to earnings
  • GYMB: hits new high after reporting earnings
  • STP: bounces nearly 20% after raising guidance
  • BLUD: gaps lower on analyst downgrade
  • RAVN: gaps lower after reporting earnings
  • BKS: stock tanking after reporting earnings
  • PLCE: falls back to 50-day after reporting good earnings
  • YHOO: falls to a new 52-week low


Market Comments: The market is not getting much of a bounce. But measures of investor anxiety continue to rise. The VXN is up again today, the CBOE put/call is again over 1.0, and the bull/bear spread in AAII is now negative again. These are the necessary ingredients for a tradable bottom. I have began to add to my long positions.

Looking For A Bounce

Morning News of Note:
  • YHOO: Yahoo to Roll Out New Ad-Ranking Technology Yahoo Inc. is making several strategic "big bets" for the next five years that embrace new technologies and new ways to squeeze revenue from them, Chief Executive Terry Semel said. The Sunnyvale, Calif., Internet company also plans to start rolling out its new search-advertising ranking technology in the fourth quarter, a move that the company hopes will help it close the "monetization" gap with search-engine company Google Inc. (Full Story) WSJ
  • GM: GM's Recent Share Gains Don't Add Up WHEN IT COMES TO General Motor's stock, things just haven't been adding up. Despite declining market share and a debilitating cost structure, the stock is up about 26% since mid-April while the Standard & Poor's 500 index fell 2% in the same period. If you are scratching your head, asking what has changed, so are GM short sellers. (Full Story) BARRONS
  • MMM CSCO GLW QCOM: Hardware firms oppose Net neutrality laws Some of the largest hardware makers in the world, including 3M, Cisco, Corning and Qualcomm, sent a letter to Congress on Wednesday firmly opposing new laws mandating Net neutrality--the concept that broadband providers must never favor some Web sites or Internet services over others. That view directly conflicts with what many software and Internet companies have been saying for the last few months. (Full Story) CNET
  • OII: Oceaneering Intl Inc-OII announces largest services contract in company's history: The company announced today that it was awarded the largest Inspection & Corrosion Mgt Services contract in their history. The contract was awarded by BP Exploration Operating Company Ltd and is expected to generate $90M over a three year term.
  • Mad Money Summary: Cramer opened his show addressing the struggling stock market. He said what is important to remember is that some stocks are done suffering. He recommended Qualcomm (QCOM), which dropped on a possible patent infringement with Broadcom (BRCM). Then he recommended Oceaneering International (OII), a company which provides drilling support, technology services and hardware to oil companies and drillers that operate in "harsh areas," which Cramer noted were the only places left with new oil. Then Cramer recommended Chico's FAS (CHS), which he believes is a best of breed stock. Cramer then spoke to the CEO of Earthlink (ELNK), and gave the stock "one thumb up." In the "Lightning Round," Cramer was bullish on Koppers (KOP), Cheesecake Factory (CAKE), Yum! Brands (YUM), Darden (DRI), BP (BP), Chevron (CVX), ConocoPhillips (COP), Exelon (EXC), VF Corp (VFC), TD Ameritrade (AMTD), Toyota (TM), General Motors (GM), Apple (AAPL), The Children's Place (PLCE), Men's Wearhouse (MW), Abercrombie & Fitch (ANF) and Akamai Technologies (AKAM), and was bearish on IBM (IBM), Krispy Kreme (KKD), Emcore (EMKR), Red Robin Gourmet Burgers (RRGB), Energy Transfer Partners (ETP), Exxon Mobil (XOM), Northgate Minerals (NXG), Under Armour (UARM), Lithia Motors (LAD) and Paccar (PCAR).


Market Comments: The market is getting a small bounce at the open, but it's nothing to get excited about. It might have been better for the market to open down, and shake out the last of the weak holders. Nonetheless, if bond yields continue to decline, and oil stays under $70, I expect the market to build on its gains.

The market has become increasingly jittery about inflation, but I think these concerns are overblown. If energy and commodity prices are topping, the housing market is cooling, and the economy is slowing down a bit, inflationary pressures will naturally moderate.

Moreover, a few years ago everyone was worried about deflation. But the Fed assured us that they could reflate the economy. So now that we are indeed seeing a little inflation, maybe we should accept it as a victory for the Fed that they were able to stave off deflation like they said. All growing economies exhibit some measure of inflation.

long GLW

Quote of the Day

"They say that knowledge is power. I used to think so, but I now know that they meant money." ~ Lord Byron
'

Wednesday, May 17, 2006

Another Distribution Day

The market finished near it's lows today, and volume rose on both exchanges, making for another distribution day. The selling has certainly been nasty, but the market is now deeply oversold.

Brokerage stocks (-2.9%) and materials (-2.6%) were hit hardest, though every sector I follow was down on the day.

It looks like I was a bit early in calling for a snapper in the market today. But I stand by my call, and think the market will finish higher into the end of the week. Measures of investor pessimism spiked today. Witness the CBOE put/call ratio hitting 1.72, or the VXO index spiking +25% intraday, to levels not seen since October 2005.

It is somewhat rare to see such a big spike in these fear indicators this early in a correction. Typically, the indicators spike toward the end of a correction, as investors throw in the towel. As such, I suspect that we should get a pretty good bounce. But since this correction likely needs to put in more time, I will be looking for some sort of retest after said bounce runs its course.

Calling For A Snapper

I rarely go out on a limb publically. But on TheStreet.com, I posted today when the market was down over 180 points that I thought a snapper was lurking. I am seeing such a spike of negativity, that I think a late rally could erase all of today's losses!

The put/call ratio has been above 1.0 for 3 straight days, and today it opened at 1.72. That's huge. Also, the ISE Sentiment Index hit a new 52-week low at 83. Add to that the volatility indexes (VXO/VXN) which are spiking to new highs (ytd).

I am also looking at a few stocks we own, which I think are good "tells" for this market. Look at GOOG, SNDK, and KSS. They are all up today, in this terrible tape, and bode well for a strong close.

Engine room, more steam!!


long GOOG, KSS, SNDK

Investor Anxiety Is Rising

Morning News of Note:
  • TWX: AOL Enters Social-Network Fray Playing catch-up with rivals like MySpace and Microsoft Corp., AOL has launched a social-networking site for its 43 million U.S. instant-messaging users. AIM Pages, which debuted last week, allow AIM users to chat with "buddies" while creating and searching profile pages similar to those on other leading social-networking sites. (Full Story) WSJ
  • MOT: Motorola's Q could ring by next week Motorola's Q, a multimedia phone that's something of a cross between a BlackBerry and a video iPod, will hopefully come out next week, said the company's CEO. "We're in the final throes of getting it released," Ed Zander, Motorola's CEO, said during a question-and-answer session at the Gartner Symposium ITxpo taking place here this week. "We are a little late. We thought it would be out in January." (Full Story) CNET
  • Hedge Funds / Commodities: Heard on the Street... Fast Money Cools on Commodities Despite the criticism being leveled at hedge funds for driving up commodity prices this year, many of the large funds have actually been cautious, or downright bearish -- costing them money in the process. The prices of gold, copper, silver and other commodities have weakened this week and energy prices have eased, so some of these skeptical funds and other large speculative investors are seeing gains. (Full Story) WSJ
  • AAPL: How Apple's Store Strategy Beat the Odds When Apple Computer Inc. opened its first Apple retail store in 2001 in a shopping mall in McLean, Va., critics saw the initiative as an expensive, dubious gamble. But as Apple prepares to take the wraps off its latest, most ambitious store yet -- on New York's Fifth Avenue, opposite the Plaza Hotel and Bergdorf Goodman -- there are few doubters left about Chief Executive Steve Jobs's retail strategy. (Full Story) WSJ
  • GE: The Financial Times reports General Electric (GE) sharply increased its revenues from environmental goods and services last year, and more than doubled its future order book from these businesses. The co will announce on Wednesday that revenues from products and services gathered under its Ecomagination brand, for environmental products, rose from $6.2 bln in 2004 to $10.1 bln in 2005, and the co's backlog of advance orders, mostly to be fulfilled in three to five years, has risen to $17 bln. GE estimates that revenues from Ecomagination will continue growing at a similar annual rate.
  • YHOO GOOG: Yahoo seeks to narrow search engine gap vs. Google-Financial Times: Yahoo (YHOO) on Tuesday set out plans to harness the collective knowledge and interests of its 400M regular users to develop the next generation of search technology and narrow the gap with Internet juggernaut Google (GOOG), the Financial Times reported Tuesday. The vision, to be outlined at the company's analyst day in San Francisco, comes as Google's growing lead in search and its steady encroachment in e-commerce and other forms of Internet activity have touched off a scramble among rivals


Market Comments: The market has opened down this morning on a slightly higher than expected CPI report (+0.3% vs. +0.2% consensus). This news of creeping inflation is disconcerting to the market as it raises fear that the Fed will have to keep raising rates to stave off rising inflation.

Of course, I think the market is poised for a bounce. Not only is the market now short-term overosold, but the put/call ratio has been rising sharply over the last few days. It has closed over 1.0 for the last 3 days, and this morning opened at 1.72. This is as high a number as I have seen in a long time. I wouldn't be surprised to see a snapper in the market today.

That said, I am still looking for the market to put in more time on this correction. But these things never come in a straight line, so I expect to see some strength that will serve to keep the newly minted bears on their toes.

long GE, GOOG, TWX

Quote of the Day

"The person who doesn't know where his next dollar is coming from usually doesn't know where his last dollar went." ~ Anonymous
'

Tuesday, May 16, 2006

No Bounce Yet

The market finished on a somewhat weak note. Lower bond yields didn't do much to help. Volume eased on the NYSE, but rose on the Nasdaq. That makes for 4 distribution days in the last 6 sessions. Not exactly a sign of strength, but one that does set us up for a bounce.

In terms of market caps, small-caps fared the best (-0.2%) while large-cap tech led to the downside (-0.7%).

Drilling down to the sectors, consumer staples and healthcare led the way (+0.3%), while retailers (-2.2%) and biotech (-1.2%) were sold the hardest.

For the most part, the commodity stocks were weak again, and when a momentum group that has led the market gets taken to the woodshed, it tends to weigh on the market as a whole. Longer-term, lower commodity prices (and thus lower inflation) should be construed as a net positive for equities.

But as I have said over and over on this site, the market has had quite a stretch without much of a correction. Each time it looked like one might be upon us, the market saved itself. I think this time the market won't be able to save itself. I don't think it will too much of a drop, but it should be a slow enough grind to bring out the requisite levels of bearishness needed for the market to put in a tradable bottom.

How Strong Will The Bounce Be?

Morning News of Note:
  • OXY: Ecuador Revokes Occidental Pact Over Sale of Local Drilling Rights Ecuador Monday expelled Occidental Petroleum Corp., the latest hostile move against foreign-oil companies by a Latin American government. The move by the small, coastal nation, Latin America's fifth-biggest oil producer, came after a long-running legal dispute over whether the California-based firm had broken local laws in selling some of its local oil-drilling rights to a Canadian firm, EnCana Corp., without government approval. (Full Story) WSJ
  • GE: NBC Looks Beyond TV for a Prime-Time Revival NBC, eager to improve its ratings and advertising sales, is counting on digital media as much as television for a comeback in the 2006-7 season. In a two-hour presentation yesterday to advertisers and agencies at Radio City Music Hall, executives at NBC, which is finishing fourth again in ratings for the 2005-6 season, emphasized the breadth and depth of their digital offerings as they talked up the prospects of their new dramas and sitcoms. (Full Story) NY Times
  • Japan / Commodities: Heard on the Street... Markets Brace for Impact Of Japan's Growing Hunger Commodities markets around the world are facing a new wild card: Japan. The world's second-largest economy appears to be firmly on the mend after years of lackluster growth. That is an important development for commodities markets. Even as prices gyrate -- or, like yesterday, retreat -- Japan adds another driver of demand at a time when supplies of copper, crude oil and other goods already are tight. (Full Story) WSJ
  • VIA AAPL: Viacom B-CIA.B MTV to launch competitor to Apple's iTunes-Financial Times: MTV, the cable television music channel owned by Viacom (VIA.B), will launch a digital music download service on Wednesday designed to compete with Apple Computer's (AAPL) highly popular iTunes service, The Financial Times reported Monday. The service, called 'Urge,' will use Microsoft's (MSFT) latest Media Player technology and represents perhaps the most serious challenge to Apple's dominance of the legal digital music download market to date.
  • Mad Money Summary: Cramer dedicated his show last night to the top ten best-of-breed retail stocks. They are more expensive then their peers, but you are paying for consistency. His first pick was electronics retailer Best Buy (BBY). His second pick was the runner up in hardware, Lowe's (LOW), which is second to Home Depot (HD). His third pick was warehouse retailer Costco (COST), which he chose over Wal-Mart (WMT). His fourth pick was Men's Wearhouse (MW). His fifth pick was high-end retailer Federated Department Stores (FD), which owns Macy's, Bloomingdale's, Filene's and Lord & Taylor. His sixth pick was Sears (SHLD), which Cramer notes is more of a real estate story than a retail story. His seventh pick was JP Penney (JCP), which just added Sephora cosmetics to its stores. His eighth pick was Coldwater Creek (CWTR), a regional-to-national story. His ninth pick was "yuppie heaven" Starbucks (SBUX). His tenth and final retail pick was retail bank Commerce Bancorp (CBH).


Market Comments: The market has a slight bid at the open. The core PPI came in below expectations for a second straight month. This has helped bond yields move lower again today, currently at 5.13%.

The Nasdaq is very oversold now, and that has the bulls looking for a big bounce. I'm not seeing it yet, but if buyers show up later in the day that would be a good sign.

Materials stocks have corrected sharply the last few days, after enjoying meteoric rises over the last month or so. It is too early to say, but it looks like a typical blowoff move, where stocks rise in a parabolic fashion and then come crashing down. The test will be what happens after these stocks bounce. Do they then consolidate nicely, or do they continue to break down below support?

It will be interesting to see which group moves into the leadership position after the market correction. Although we still don't know how deep this correction will be.

long GE

Quote of the Day

"Having money does not insure happiness. People with ten million dollars are no happier than people with nine million dollars." ~ Hobart Brown
'

Monday, May 15, 2006

Metropolitan Home Sales Report

The NAR's quarterly report of metropolitan existing home sales was released this morning. It showed some of the usual overheated areas as still red-hot, but also showed some cooling elsewhere.

In areas like Los Angeles and San Diego, year/year growth rates continued to decline, coming in at +19% and +4%. San Francisco came in at +5%, contuing its streak of 4 quarters of declining growth. Miami falls into this boat also, coming in at +11%.

Moreover, not only are the yr/yr growth rates declining, but in LA and Miami, the median sales price actually declined last quarter for the first time in several years. This is likely indicative of the peak we have seen in the housing market.

Here are some of the hottest, and coolest cities in the report:
  • Phoenix, AZ: +38.4%
  • Gainseville, FL: +31.9%
  • Ocala, FL: +30.8%
  • Virginia Beach: +27.1%
  • Daytona, FL: +25.4%
  • Eugene, OR: +25.3%
  • Portland, OR: +21.8%
  • Boston, MA: -1.5%
  • Cleveland, OH: -3.0%
  • Indianopolis, IN: -2.4%

Monday Morning Musings

Morning News of Note:
  • GM: Hummer H1 Reaches The End of the Road The Hummer H1, the biggest, toughest sport-utility vehicle on the road, could crush anything in its way -- except poor sales. Cheering just about every other driver on the road, General Motors Corp. yesterday said it was ditching the H1 by June. (Full Story) Washington Post
  • WMT KSS TGT JCP: Will Discount Retailers Bounce Back? The dollar is weakening, the housing market is cooling, and consumers are reining in their spending. That doesn't sound like the ideal backdrop for investing in the stock of retail companies. But for those who are willing to take a little risk -- and who have better-than-average patience -- now might be the right time to latch on to discount retailers (Full Story) WSJ
  • SNDK: SanDisk's Hope: Flash Chips Everywhere SANDISK WAS IN TOWN LAST WEEK, to pick up $1 billion for its flash- memory factories. In a sit-down with your favorite tech-stock columnist, SanDisk CEO Eli Harari said it was unbelievably easy for SanDisk to sell the convertible notes offering. He's got a use for the money. (Full Story) BARRONS
  • N RIO RTP BHP: Heard on the Street... Mining for the Canadian Jewels Think of it as the mining industry's version of "The Great Game," a high-stakes international chess match for sector supremacy. As prices soar for copper, nickel, zinc and other base metals, big mining companies are jockeying to gain control of some of the industry's crown jewels: Canadian mining companies with huge production of suddenly hot metals. (Full Story) WSJ
  • GOOG: BusinessWeek reports a small team inside the co for two years has been zeroing in on an entirely different audience: corporate IT departments. By hooking into the co's search appliance, such companies as Cognos (COGN), Salesforce.com (CRM) and S.A.S. can bring the co's familiar search functions to business apps that have traditionally been anything but user friendly. The linchpin for the co's software partnerships is its so-called "OneBox" function, which has been deployed in recent months across its consumer search engine. OneBox is an attempt by the co to pull out relevant information and answer the user's query immediately above the search results. The co clearly wants to sell more than enterprise search appliances to companies. It is already finetuning versions of Gmail and its desktop-search offering for businesses and universities. The co hasn't yet decided how it will attempt to make money on these enterprise versions of its consumer products. They won't command lofty license fees like its search appliances, and instead may end up being ad supported. In addition, the co has taken a hands-off approach to selling corporate-search products, offering less in the way of professional services or ongoing customer-support contracts.
  • Mad Money Summary: Cramer opened his show on Friday discussing PetroChina (PTR), a huge oil company that is unloved in America because Americans are wary of Chinese companies cooking the books. But Warren Buffett bought into PetroChina and is now a major stakeholder in the company. Cramer believes PetroChina could replace ExxonMobil (XOM) as the granddaddy of oil companies. Cramer then discussed an alternative energy play that is not solar or wind related, called the Fischer-Tropsch process, which turns coal into gas. He recommended Rentech (RTK), but noted that it is a very speculative stock. Cramer then discussed an upgrade of Office Depot (ODP) from Citigroup, which raised the price target of the company to $60. In the note, the analyst also noted that Office Depot will probably buy Buhrmann (BUH), which Cramer called either "very brave or very stupid." He said the speculation should be taken seriously and added that Buhrmann had good fundamentals. In the "Lightning Round," Cramer was bullish on Tenaris (TS), PetroChina (PTR), Openwave Systems (OPWV), Votorantim Celulose e Papel (VCP), Fluor (FLR), McDermott (MDR), Pacific Ethanol (PEIX), Crocs (CROX) and Foster Wheeler (FWLT), and was bearish on Powerwave Technologies (PWAV), Petroleo Brasileiro (PBR), Sirius Satellite (SIRI) and Goldcorp (GG).


Market Comments: The market has already been pretty volatile this morning, and that's just in the first hour of trading. After opening lower, the market made a stab higher, then broke back below its early lows, only to rise again. If this keeps up, traders will need more maalox.

This is options expiration week, so we should expect to see some higher volatility. The commodity stocks have gapped lower at the open. I expect these stocks to bounce before heading lower again, so I have not shorted my basket yet.

Financials and healthcare look solid in the early going, while tech and energy are weak.

The NAR's report on metropolitan home prices came out this morning. I will be back with some of the highlights in a bit.

long GOOG, KSS, SNDK, WMT

Saturday, May 13, 2006

Weekly Recap

The stock market had a very rough week. Reality finally hit home on the interest rate front.

The S&P 500 index was dead flat on Monday and Tuesday. The reason was simple. The market was awaiting the Fed's policy announcement on Wednesday. Another 1/4% hike in the fed funds rate to 5% was fully expected, and it happened. There were also high hopes that the Fed would give an indication that it would either pause at the next meeting and not raise rates then, or that it would indicate that the rate hikes were over. That didn't happen.

Instead, the Fed policy statement said "some further policy tightening may yet be needed" and that the "extent and timing" was uncertain. The statement also said, to no one's surprise, that the upcoming data would be critical in determining policy. After all, if the economy weakens significantly, the Fed probably won't raise rates again. If inflation picks up, the Fed will keep raising rates.

The problem was that the market was hoping to look past the top of the interest rate cycle while economic growth remained strong. Now, there are by no means any assurances that the Fed won't raise rates again. In fact, if economic growth continues to put pressures on resource utilization, more rates hikes are likely. The market is not likely to get the best of both worlds - strong economic and earnings growth and no more rate hikes.

The S&P vacillated on Wednesday after the announcement and closed down just 2 points.
Then the selling started. The S&P plunged 17 points on Thursday. This was at times ascribed to a continued sharp rise in commodity prices or to a weaker than expected April retail sales reports. But the commodity story is by no means new, and the retail data could have been spun as a reason why the Fed would be cautious. The real reason for the selling was the realization that interest rates are still going higher, perhaps much higher than was priced into the stock market.

The selling continued on Friday, and for the same reason. There was no news, and oil prices were actually down a bit. Yet the S&P dropped sharply again.

This week, it was all about the Fed.

Earnings season essentially closed out. Over 90% of the S&P 500 have now reported first quarter earnings and the reports tail off sharply in the weeks ahead. Oil is holding well above $70 a barrel. The 10-year note yield has backed up to 5.18% from 5.11% at the end of last week as it continues its steady march higher.

The focus in the weeks ahead will be on the incoming data. The market is caught in a bit of a vise. Strong economic data represents a risk in that it may lead to the Fed raising rates. Weak economic data undermines the market optimism about earnings growth. Furthermore, any uptick in inflation data could send tremors through the market. The stock market is not yet priced for further rates hikes which may well be coming. This reality set in last week, and some further consolidation may yet be needed.

Friday, May 12, 2006

Market Closes At Its Lows

So much for a potential bounce. The market basically closed at its lows for the day. This could result in additional weakness at the open on Monday.

The SPX fell -1.1% today, the COMP was -1.3%, and the RUT was -2.0%. Energy and material stocks were down the most.

Breadth was very negative, and it won't take much more selling to move the markets into oversold territory. The Hi/Lo index went negative on both exchanges, and this marks the first time the number of new lows exceeded new highs on the Nazz all year.

Volume rose on the NYSE, making for a 2nd straight distribution day, but it did not rise on the Nasdaq.

In all, this turned out to be a pretty ugly week, with the market merely hovering near its highs before the FOMC meeting, and then getting the rug pulled out from under it thereafter. The NDX is actually down for the year after today. TGIF--

2 Hours To Go

With less than 2 hours left, the markets are still hovering near their lows for the day. The SPX has broken below its 50-day, as has the Russell 2000 small-cap index.

Energy and material stocks are leading the decline, which should not be suprising given the parabolic moves in many of these stocks. I am considering shorting a basket of them on a bounce. Retailers and financials are also down quite a bit.

We are seeing some fear enter the market, as the CBOE put/call ratio has been running above 1.0 all day. The volatility indexes (VXO/VXN) are also getting jumpy.

This is shaping up to be a pretty rough week for the market, but let's see what kind of bounce (if any) the bulls can put together before the close.

I'll be back--

Market Opens On A Weak Note

Morning News of Note:
  • Airports / Airlines: Cleared for Landing The Federal Aviation Administration has begun opening "express lanes" for planes into and out of airports nationwide that could mean fewer canceled or diverted flights. These new flight paths, following successful test runs in Alaska, California, Oregon and Washington, D.C., result from technical advances in navigation that allow planes to take off and land in poor weather, even at airports near mountains or other obstacles on the ground. (Full Story) WSJ
  • UVN: Televisa Forms Investor Group for Univision Bid Grupo Televisa SA plans to join with Venezuelan billionaire Gustavo Cisneros and four buyout firms to bid for Univision Communications Inc., the largest U.S. Spanish- language television network, two people with knowledge of the situation said. Mexico's Televisa, the world's largest Spanish-language broadcaster, hasn't decided how much to offer for Univision, whose market value is $10.9 billion, said the people, who declined to be identified before a bid is made public. (Full Story) Bloomberg
  • WMT: Wal-Mart Eyes Organic Foods Starting this summer, there will be a lot more organic food on supermarket shelves, and it should cost a lot less. Most of the nation's major food producers are hard at work developing organic versions of their best-selling products, like Kellogg's Rice Krispies and Kraft's macaroni and cheese. (Full Story) NY Times
  • PG: Will Audience Stomach Coffee Pitch? How do you market a product as strong and weak at the same time? That's Procter & Gamble's challenge as it launches a new line of Folgers coffee this week that it promises is both gentle on stomachs and packs the same taste and caffeine punch as its regular brew. (Full Story) WSJ
  • Mad Money Summary: Cramer opened his show finding the bull markets for his viewers. He said to remember the acronym BRIC, which stands for Brazil, Russia, India and China. Cramer said to look at Brazilian steel company Gerdau (GGB), which trades on the NYSE. Then Cramer suggested "worldwide power merchant" AES (AES), which has business in Chile, Brazil, India, China, Pakistan and Vietnam. He said the stock was burned by the Enron scandal and is now cheap and undervalued. Cramer then recommended Triumph Group (TGI), which supplies both Boeing and Airbus. Cramer then discussed microprocessors, speaking to Advanced Micro Devices (AMD) CEO Hector Ruiz. Cramer said he likes AMD, but would be a seller of Intel (INTC). In the "Lightning Round," Cramer was bullish on Sysco (SYY), KFX (KFX), Qwest (Q), Level 3 (LVLT), Hexcel (HXL), Matria (MATR), Baidu (BIDU), Eastman (EMN), First Data (FDC), News Corp (NWS), and Union Pacific (UNP), and was bearish on Empire Resources (ERS), Spartan Stores (SPTN), Netease.com (NTES), Ashland (ASH), Lightbridge (LTBG) and Medtronic (MDT).


Market Comments: The market has opened under some pressure this morning, following yesterday's schmeissing. Volume rose yesterday, making for a strong distribution day. That is number 5 or 6 for the Nazz in the last several weeks.

I am surprised to see KSS down, considering how strong the quarter was, but maybe it just needs to mark time for a little.

The semis are bouncing. BRCM and MRVL were down at the open, but have reversed sharply higher. And many financial stocks on my screen have done the same this morning.

Bond yields are moving higher, which is a headwind. And the plunge in the dollar is likely disconcerting to some as well. Every time the dollar swoons, you have people who come out and start talking about 1987 all over again. But the strength of the corporate bond market should comfort them, as tight spreads signal confidence.

The SPX is testing support at its 50-day, while the COMP has gapped down even further this morning.

long PG, WMT; net long MRVL

Quote of the Day

"I'm living so far beyond my income that we may almost said to be living apart." ~ E.E. Cummings
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Thursday, May 11, 2006

Weak Into The Close

The market has not been able to find its customary late-day lift. The COMP is down nearly 50 points, which is the equivalent of roughly 250 Dow points.

Breadth is very weak, and volume is rising. This will make for a pretty strong distribution day, pointing to more weakness. Measures of investor anxiety have started to pick up a little, but it is just a start.

Oil is back up over $73, and bond yields are up near year highs at 5.16%. It seems that the prospect for higher energy prices, higher interest rates, slower housing, and slower economic growth have unsettled the market today.

GOOG is taking a hit, and if flirting with support at it's 50-day. SBUX has broken strongly below its 50-day. And URBN looks like it may have found a short-term bottom coinciding with today's earnings report.

I will be suprised if the market doesn't see at least some additional weakness in the near-term, and have raised some cash accordingly.

long GOOG, URBN

Market Weakens Further

Market Comments: The selloff that started at the open has continued, with most indexes off more than 1%. The NDX and RUT (small-caps) are down -1.7%, while the SOX is off more than 2%. I don't have any positive sectors on my screen.

The COMP has broken further below its 50-day moving average, so that support is broken. And intraday measures of investor anxiety (put/calls, volatility indexes) dont' seem to be running at high enough levels to stem the tide.

We'll have to see if the market once again gets "saved" into the close.

Also, I want to give a shoutout to boxer Floyd Patterson, who passed away at age 71. Patterson once said, "They said I was the fighter who got knocked down the most, but I also got up the most." I think that's an appropriate statement for investors as well.

Retail Sales Weaker Than Expected

Morning News of Note:
  • SBUX: Stirring Insider Sales at Starbucks INVESTORS CAN'T HELP but be addicted to Starbucks, whose startling growth has pushed the stock to heart-fluttering heights. Amid questions about the stock's pricey valuation, the coffee giant's two top executives are taking their biggest profits in two years. Starbucks shares have nearly quadrupled in price since the beginning of 2003. The stock slightly waned this week, slipping 4% from the May 5 record intraday high of $39.88 (on a split-adjusted basis), after a Tuesday article in The Wall Street Journal noted its hefty valuation. (Full Story) BARRONS
  • INTC CSCO SNE SHCAY CMCSA: Putting the Wire Back Into Networking Back in the Stone Age of home networking, anyone who wanted to play on a computer not hooked directly into an Internet connection had to snake phone lines or Ethernet wires across floors and up staircases. People talked about a promising idea: using the electrical wiring already in the house to move data from room to room. One early application, the X10 system for controlling lights and appliances, didn't always work well. (Full Story) NY Times
  • SIRI XMSR: Heard on the Street... Tuning In Institutional Holders Gary Parsons, chairman of XM Satellite Radio Holdings Inc., was gratified in 2004 when blue-chip mutual funds began taking or increasing their stakes in his company. The bets made by investors like TCW Asset Management, Fidelity Investments and Wellington Management were a sign that long-term investors were taking XM seriously. XM's smaller rival, Sirius Satellite Radio Inc., is still in the takeoff position with institutional holders. Although it has attracted some white-shoe investors like Fidelity, the bulk of its holders -- around 72% -- are individual investors. (Full Story) WSJ
  • AZR: Aztar-AZR gets increased offer of $53 per share from Columbia Entertainment: Aztar Corporation announced that it has received an offer from Wimar Tahoe Corporation d/b/a Columbia Entertainment, the gaming affiliate of Columbia Sussex Corporation, to acquire Aztar in a merger transaction in which the holders of Aztar common stock would receive $53.00 per share in cash and the holders of Aztar's Series B preferred stock would receive a commensurate payment dictated by the terms of their securities
  • Mad Money Summary: Cramer opened his show discussing Mexican airport operator Grupo Aeroportuario del Sureste (ASR), which translates to Southeastern Airport Group. The stock is a turnaround story, and more than that, the company now has "monopolistic pricing power." Cramer then discussed a stock which just reported a bad quarter and closed under $3, EuroZinc Mining (EZM). EuroZinc is a supplier to RTI International Metals (RTI), which just won a major $800M contract wiht Airbus. Cramer believees this is a good entry point for the stock. Cramer then spoke to Administaff (ASF) CEO Paul Sarvadi over the phone. Cramer said he cannot be bullish on the stock until he sees the company buyback shares, but he believes the story is interesting and the stock may deserve a second chance. In the "Lightning Round," Cramer was bullish on Allegheny Technologies (ATI), Abercrombie & Fitch (ANF), America Movil (AMX), TXU (TXU), FPL Group (FPL), Agilent (A), Flagstar Bancorp (FBC), Citigroup (C), Crystallex International (KRY), Toyota (TM), General Motors (GM), Cadbury Schweppes (CSG), Hansen Natural (HANS), Network Appliance (NTAP), Companhia Vale do Rio Doce (RIO), Consol Energy (CNX), Peabody Energy (BTU) and Yum! Brands (YUM), and was bearish on Titanium Metals (TIE), Telmex (TMX), Southern Co. (SO), Lucent (LU), Pepsi (PEP), Gateway (GTW), JDSU (JDSU) and Covanta Holding (CVA).


Market Comments: April retail sales came in at +0.5% vs. consensus of +0.8%, though some of this weakness was related to autos. Bond yields are higher again this morning, with the 10-year trading up to 5.15%.

And the rest of the market is trading lower, with the exception of energy and commodity stocks, some of which have made parabolic moves recently.

Tech is under pressure, and the Nasdaq is pulling back below its 50-day average today. I know that every time this year I have mentioned that a correction could be in the works, the market has immediately turned back up. But with the market currently overbought, it seems worth noting again.

The ISE Sentiment Index closed over 200 twice so far this week. That is a sign that investors are more bullish right now, and that won't help the market if it continues to pull back. We need to see investor pessimism rise in order to halt a potential slide.

long INTC

Wednesday, May 10, 2006

No Surprise by the Fed

The FOMC raised rates for the 16th consecutive time, by 25 basis points to 5.0%. They also said that some additional tightening might be needed. This is not a big surprise, but in usual fashion, the stock market sold off and bond yields spiked on the news.

Here is the FOMC statement:

"The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5%. Economic growth has been quite strong so far this year. The Committee sees growth as likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices. As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures. The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives. In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6%."

Despite the language, the fed funds futures market is still predicting a less than 50% chance of another rate hike in June, implying a pause.

If stocks continue to sell off, I expect it to be a brief dip.

Hurry Up and Wait

Morning News of Note:

  • MSFT AMZN GOOG: Tech-Firm Spending: Too Much? Leading Web and technology companies such as Microsoft Corp., Amazon.com Inc. and Google Inc. need to spend more money to stay ahead of the competition. Now, all that spending is fueling investor backlash against some of the stocks. Microsoft recently surprised Wall Street when it said it would spend about $2 billion more than analysts had estimated over the next fiscal year to improve areas such as online-advertising services. (Full Story) WSJ
  • WFMI: Whole Foods Talks Dollars and Cents With its white-apron-clad chefs, who whip up almond crusted flounder for $14.99 a pound, and its rows of hard to pronounce cheeses (consider bleu D'Auvergne, best paired with a Rhône red wine), Whole Foods Market has always felt like the Saks Fifth Avenue of supermarkets. But the organic food emporium, all but synonymous with gastronomic indulgence, now wants to be known for something else: low prices. (Full Story) NY Times
  • GM: GM Will Seek Higher Prices On Cars Sold to Rental Firms General Motors Corp. has signaled to rental-car companies that it intends to boost prices for 2007 vehicles, part of a potential shift in how Detroit's Big Three auto makers deal with rental-car companies and their steep loss of market share at home. Since the late 1980s, General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group have produced far more vehicles than they can sell to consumers and dumped the excess on rental fleets, often at bargain-basement prices. (Full Story) WSJ
  • YHOO: Spanish Yahoo, Telemundo.com Plan Merger Internet company Yahoo Inc. and NBC Universal's Telemundo broadcast network plan to merge their Spanish-language U.S. Web sites, in a bid to better target the growing Hispanic audience on the Web. The move highlights how U.S. media companies and advertisers are increasingly focusing on the Hispanic audience online, just as they have done offline in recent years. (Full Story) WSJ
  • Mad Money Summary: Cramer opened his show by recommending Amcol International (ACO), a company which makes absorbent clay from volcanic ash. the clay, called bentonite, is essential to oil-drilling. Cramer then recommended buying the French company Alstom, which trades in Paris under the symbol ALO. He said the infrastructure company will reap the rewards of our leaders upsetting nations around the world. Cramer then recommended Northrop Grumman (NOC) and Lockheed Martin (LMT), businesses which "are getting fat off of government deals" and are cheap stocks in a soaring sector. In the "Lightning Round," Cramer was bullish on Mobile Mini (MINI), JDS Uniphase (JDSU), Honda (HMC), Toyota (TM), RPC (RES), Ceradyne (CRDN), FPL Group (FPL), Nektar (NKTR), Energy Partners (EPL), RF Micro Devices (RFMD), Lifecell (LIFC), American Movil (AMK), Sygenta (SYT), Cenveo (CVO), Gehl (GEHL) and Knight Capital (NITE), and was bearish on Nuance (NUAN), Teco (TE) and Concur Technologies (CNQR).


Market Comments: The market is fairly flat in early trading, and you can pretty much expect it to stay that way until after the FOMC announcement. Everyone knows that a 25 basis point hike is coming, but the language they use and whether or not it alludes to the notion of a pause is what everyone will be looking for. Expect the usual volatility this afternoon.

Tech is under some pressure after CSCO released pretty solid earnings, but the stock is down. LM is down after reporting earnings also, which is weighing on the broker group a bit. And TEVA is getting hurt in the generic drug space.

The market is waiting on oil inventories, which should be out soon. And bond yields are down a touch at 5.11%

long GOOG

Quote of the Day

"Happiness is not the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort." ~ Franklin D. Roosevelt
-

Tuesday, May 09, 2006

Stocks Hang Tough

Stocks are hanging in there ahead of tomorrow's FOMC meeting. Of course, all of the action will come after their announcement, and we could see a bit of a selloff.

Sandisk (SNDK) is hanging in there okay, after issuing a big secondary offering last night. There were some positive comments about the supply/demand equation in the flash memory markets today, and SNDK should be a beneficiary.

BJS also hangs in there, after being down more at the open on the heels of a JP Morgan downgrade. Still more upside for this one if it is to come even close to its bretheren like HAL and SLB.

And how about the reaction in HANS to earnings? Wow. Citigroup upped their price target to $205. And the company also confirmed the long rumored deal with BUD for distribution.


long BJS, C, SNDK

Stocks Hang Tough

Stocks are hanging in there ahead of tomorrow's FOMC meeting. Of course, all of the action will come after their announcement, and we could see a bit of a selloff.

Sandisk (SNDK) is hanging in there okay, after issuing a big secondary offering last night. There were some positive comments about the supply/demand equation in the flash memory markets today, and SNDK should be a beneficiary.

BJS also hangs in there, after being down more at the open on the heels of a JP Morgan downgrade. Still more upside for this one if it is to come even close to its bretheren like HAL and SLB.

And how about the reaction in HANS to earnings? Wow. Citigroup upped their price target to $205. And the company also confirmed the long rumored deal with BUD for distribution.


long BJS, C, SNDK

Morning Update

Morning News of Note:
  • AAPL: Apple MacBook, iPod changes due later this month Apple Computer's highly anticipated line of Intel-based MacBook consumer notebooks may not turn up on Tuesday as several online reports and analysts have suggested, AppleInsider has learned. Although Apple reportedly began manufacturing the notebooks over a week ago, sources say the Mac maker is unlikely to unveil the computers until the following week at the earliest. (Full Story) Apple Insider
  • ACAS: Insiders Buy Shares of Popular Fund INSIDERS AT American Capital Strategies, a respected high-dividend closed-end fund, stepped up buying as shares of the fund touched their lowest level in a year. The firm, which has a market cap of more than $4 billion, invests in public and private companies through direct capital investments or by offering debt financing to private-equity firms or employees during buyouts. (Full Story) BARRONS
  • SBUX: Heard on the Street... Starbucks Investors May Get Jitters Starbucks Corp. keeps pouring cup after cup of sweet financial results. But the company's "grande" stock price could wind up leaving investors disappointed. The company's fiscal second-quarter results, released last week, were the good news for shareholders. Earnings rose 27% for the quarter ended April 2 and sales at stores open at least a year, an important measure, rose 10%, exceeding the company's own 3% to 7% long-term projection. (Full Story) WSJ
  • Clean Energy Sector: The Nasdaq Stock Market has teamed up with Clean Edge Inc., an industry research and publishing firm, to launch a stock-performance index for the small but rapidly growing clean-energy sector. The Nasdaq Clean Edge U.S. Index is set to debut on May 18, and will track the stock performance of 45 companies in the clean-energy industry. The companies are mostly small to mid-cap, with 35 listed on Nasdaq and the remaining 10 on the New York Stock Exchange. They make products for technologies ranging from solar energy to biofuels and advanced batteries. Officials of both Nasdaq and Clean Edge, which has headquarters in Portland, Ore. and Oakland, Calif., said the index will heighten the profile of an industry which is working to expand the use of alternative energies. "This index represents the further advancement, maturing and mainstreaming of the clean-energy sector," said Ron Pernick, cofounder and principal of Clean Edge, which has been tracking the growth of clean-energy markets and companies for about five years. - WSJ
  • Flash Prices: Samsung and Hynix raise flash prices-Bloomberg: Samsung Electronics and Hynix Semiconductor, which make about 67% of the memory chips used in music players and mobile phones, have raised their prices for the first time this year as a glut of the chips eased. The stocks of both chipmakers, which trade overseas, rose on the news.
  • Mad Money Summary: Cramer opened his show discussing "new secular growth stories," including Caterpillar (CAT), U.S. Steel (X), Terex (TEX), United Technologies (UTX) and Deere (DE). Then Cramer looked at Israeli companies, suggesting NICE Systems (NICE) and Ness Technologies (NSTC). Cramer then discussed a risky stock to own as a play on oil in Kazakstan, Transmeridian Exploration (TMY). Cramer was then joined by telephone with Peter McCausland, the chairman and CEO of Airgas (ARG). Cramer said he believes Airgas is one of the new secular growers. In the "Lightning Round," Cramer was bullish on General Motors (GM), Google (GOOG), Yahoo (YHOO), Broadwing (BWNG), Level 3 (LVLT), Qwest (Q), Rackable (RACK), Rite Aid (RAD), Regal (RBC), Vasco Data (VDSI), Black & Decker (BDK) and Brocade (BRCD), and was bearish on Boston Scientific (BSX), Audible (ADBL), Nordic American Tanker Shipping (NAT), Applied Materials (AMAT) and Stanley Works (SWK).


Market Comments: The market is hanging in again, despite oil trading higher ($71) and bond yields rising to 5.13%. The EIA said 2Q Chinese oil demand would be flat versus last year, which should temper any further rise in crude prices.

I expect the market to remain somewhat subdued ahead of the FOMC announcement tomorrow, and then we could see some renewed volatility. If we do see some weakness after the Fed meeting, I expect that it will once again be short-lived.

GOOG is starting to act much better finally.

long GOOG

Technical Issues

Note: Blogger has been experiencing technical problems this morning, which may delay some of my posts. But I am working to get them up in a timely manner.
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Quote of the Day

"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." ~ Winston Churchill

Monday, May 08, 2006

Standout Stocks

Here is a list of some stocks making notable moves on rising volume:
  • ZVXI: breakout to new highs; no real news
  • ANEN: extends last week's breakout
  • DXPE: 10% bounceback from Friday's drop
  • NNDS: strong reaction to earnings; new highs
  • OII: adds to Friday's strong breakout; earnings
  • AVD: 22% plunge on lower profits report
  • UIC: 20% drop; also earnings related
  • DIOD: gaps down below 50-day
  • EBAY: continues to slide to 52-wk lows
  • CROX: sharp pullback following Friday's reversal

Monday Morning Musings

Morning News of Note:
  • DGIN: Online Banking's Cash Machine REALIZING THAT ITS BAREBONES ONLINE BANKING system could never go head-to-head with the likes of Citibank's electronic products, Eastern Financial Florida Credit Union in 2002 opted for an end run: It outsourced its operation to Digital Insight. Four years later, the small credit union, bolstered by its upgraded online offerings, is competing vigorously for customers with Citi and other banking giants in Miami, Fort Lauderdale and Tampa. (Full Story) BARRONS
  • WB GDW: Wachovia Strikes $26 Billion Deal For Golden West Wachovia Corp. struck a roughly $26 billion stock-and-cash deal to buy Golden West Financial Corp., making a big gamble on the volatile mortgage business as it extends its ambition to become a true national bank. Wachovia agreed to pay 1.051 shares of its stock, valued at $62.42 based on Friday's closing prices, plus $18.65 in cash for each share of Golden West. (Full Story) WSJ
  • GM: GMAC sale could be threatened by Moody's rating-FT: Moody's placing General Motors' (GM) unsecured credit rating on review this past Friday is jeopardizing the $7.4B sale of the company's GMAC finance arm. However, the credit rating agency said it was likely to limit any cut to one grade, from B3 to Caa, which would leave General Motors two notches above the critical point of the sale
  • YHOO: YHOO Yahoo overhauls online advertising -- Financial Times: Financial Times reports that Yahoo on Monday will unveil an anticipated overhaul of its online advertising system, rolling out new technology for handling targeted interactive ads. Story says that the overhaul is being seen on Wall Street as YHOO's most significant initiative this year, as it tries to better compete w/ GOOG. Story says that the system has been designed to initially handle keyword ads, but has also been built to target ads based on demographics or user behavior.
  • Mad Money Summary: Cramer opened his show on Friday discussing his next composite play, Germany's SGL Carbon (SGG), which makes carbon and graphite-based products. Cramer then recommended a Brazilian bank, Banco Itau (ITU), which just became the largest bank in Brazil after buying the Brazilian business of Bank of America (BAC). Cramer then recommended buying Foster Wheeler (FWLT), saying, "If you think the president will push through new refineries, you will win with Foster Wheeler." In the "Lightning Round," Cramer was bullish on NightHawk Radiology (NHWK), CSX (CSX), Burlington Northern (BNI), Genesee & Wyoming (GWR), Lockheed Martin (LMT), Northrop Grumman (NOC), General Dynamics (GD), Suncor (SU), Marvell (MRVL), eBay (EBAY), Occidental Petroleum (OXY), GlobalSantaFe (GSF), Paychex (PAYX), Whole Foods Market (WFMI), Coldwater Creek (CWTR), Palm (PALM) and Procter & Gamble (PG), and was bearish on Martha Stewart Living Omnimedia (MSO), American Science and Engineering (ASEI), PW Eagle (PWEI), CalAmp (CAMP), Quality Systems (QSII), Christopher & Banks (CBK) and Research In Motion (RIMM).


Market Comments: Oil is trading lower this morning, and energy stocks with it, on the news that Iran's PM wrote a letter to Bush trying to make nice. Most other sectors are higher in early trading, and there were a few mergers on this Monday.

Wachovia (WB) is buying Golden West (GDW) and Thermo Electron is buying one of our stocks, Fisher Scientific (FSH), which is getting a nice pop. I usually sell the stocks into this kind of news, as it then becomes an arbitrage game until the merger is finalized.

We also have another FOMC meeting this Wednesday, so the markets may remain a bit cautious ahead of that as investors anxiously await further comments about whether or not the Fed may pause at its next (June) meeting.

long DGIN, FSH

Quote of the Day

"Money is plentiful for those who understand the simple laws which govern its acquisition." ~ George Clason
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Friday, May 05, 2006

Surprising Strength

The market has built on its early gains, and is putting in one heck of a day. I am surprised that there has been little to no profit taking before the weekend, as often happens.

Some stocks are really bouncing strongly. The brokers (GS, BSC) are acting well, TGT is getting a nice bounce, HANS is spiking to new highs, WMFI is extending its gains, and on and on.

Oil prices are down again, most of the energy stocks are hanging in nicely. Bond yields are also lower, and that sentiment seems to be really helping stocks.

The bears don't look like they are going to be having too much fun this weekend, let alone celebrating Cinco de Mayo!

long GS

Payrolls Data Hints at Slowdown

Morning News of Note:
  • TWX: AOL to Add Free Phone to Instant Messaging Feature AOL is preparing to offer the 41 million users of its instant messaging system a free phone number that will allow people to call them from regular phones while they are online. The move is part of a broad effort by AOL — which has been buffeted by defections from its flagship dial-up Internet service — to capitalize on the continued popularity of its decade-old AIM instant message system. (Full Story) NY Times
  • RTRSY CME: The Merc's New Take on Currencies Chicago Mercantile Exchange Holdings Inc. unveiled plans for a joint venture with Reuters Group PLC to trade additional currency products, part of a push to beef up its presence in the fastest-growing areas of the derivatives industry. Unlike other exchange operators, such as NYSE Group Inc. and Nasdaq Stock Market Inc., which are both looking to expand business through mergers with other exchanges, the Chicago Mercantile Exchange Holdings and other futures exchanges believe they can pick up business by expanding into the more loosely regulated and fragmented areas of the derivatives arena. (Full Story) WSJ
  • LIZ Kate Spade: CLAIBORNE, VF WANT TO BAG KATE SPADE Apparel giants Liz Claiborne and the VF Corp. are squaring off to acquire Kate Spade, the handbag maker that was put up for sale earlier this year by majority owner The Neiman Marcus Group, The Post has learned. Final bids are due this week and the price is hovering around $130 million, sources said. (Full Story) NY Post
  • CBS: CBS Launches Web-TV Channel With New Shows Ratcheting up its competition with Internet rivals such as Yahoo Inc. in the race to provide TV shows online, CBS Corp. unveiled a Web-based entertainment channel that will be stocked with original TV shows and, eventually, reruns of the network's hits. The broadband channel, called Innertube, launched yesterday on CBS.com with a handful of original shows, including a college-based reality series called "Greek to Chic." (Full Story) Washington Post
  • LCDs: Digitimes reports Taiwan-based LCD component makers recently commented that demand for TV and PC applications will not pick up sharply until the third quarter. As LCD panel inventory levels surged rapidly in the first quarter, shipments from the companies for the second quarter are only expected to see slight growth or remain flat, the makers pointed out.
  • Mad Money Summary: Cramer opened his show discussing ethanol, and recommended a "stealth ethanol play," Syngenta (SYT), which makes a special seed that could boost the ethanol industry. Then Cramer discussed the war between the cable companies and the phone companies, saying investors should not bet on either side, but "buy the arms dealer." To that end he suggested Arris Group (ARRS), which makes cable modems. Cramer then gave two thumbs up to Knight Capital Group (NITE), a company he was previously wary of because of a "regulatory nightmare," which has completely cleared up. Cramer then spoke to the CEO of Cano Petroleum (CFW) over the phone, saying the company, which is involved in advanced oil recovery, was very interesting. In the "Lightning Round," Cramer was bullish on General Motors (GM), Brocade (BRCD), Schlumberger (SLB), Northgate (NXG), Sirf (SIRF), Novatel Wireless (NVTL), Zoltec (ZOLT), American Capital (ACAS), Bank of Montreal (BMO), Toronto-Dominion Bank (TD), Royal Bank of Canada (RY), Vornado (VNO), Bucyrus (BUCY), Joy Global (JOYG), Flextronics (FLEX) and Zumiez (ZUMZ), and was bearish on Home Solutions of America (HOM), Cendant (CD), Kinetic Concepts (KCI), Agree Realty (ADC), BioCryst Pharmaceuticals (BCRX) and 24/7 Real Media (TFSM).


Market Comments: The nonfarm payrolls report came in below expectations at 138,000 vs. estimates of 200,000. The market is cheering this number, as it hints at a possible slowdown that would augment the Fed's case for a pause. This has the 10-year yield down 5 basis points to 5.10%.

Of course, this soft payrolls report doesn't really jibe with the other strong economic reports we have been getting, including retail sales, ISM services index, durable goods, new home sales, etc.

Regardless, the market is speaking, and the SPX has broken out to a new high at 1320. You know I don't really like too much strength too early, especially on a Friday. I would not be suprised to see some profit taking late in the day. But my stocks are looking good for the most part, so I won't complain.

long TWX

Friday Humor

"I almost had a psychic girlfriend, but she left me before we met." ~ Steven Wright
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Thursday, May 04, 2006

Retail Sales Roundup

As I mentioned in my opening missive, most of the retail sales reports I read were better than expected, and some were truly blowout.

Here is a quick rundown of some notable names:
  • ANF: +17% (vs. +8.2% estimates)
  • AEOS: +19% (vs. +9.9%)
  • CTRN: +47.5%! (vs. +20%)
  • COST: +7.0% (vs. +5.5%)
  • KSS: +13.4% (vs. +5.7%)
  • JWN: +7.3% (vs. +4.8%)
  • ZUMZ: +19.3% (vs. +16.8%)
  • JCP: +2.6% (vs. +2.7%)
  • JOSB: +7.3% (vs. +7.0%)
  • TGT: +10.4% (vs. +10.2%)
  • BEBE: +5.7% (vs. +6.3%)
  • CHS: +5.4% (vs. +8.0%)
  • HOTT: -6.5% (vs. -2.6%)
  • PIR: -6.5% (vs. -0.7%)
  • RAD: +4.6% (vs. +5.0%)

Kohl's (KSS) was a big standout for me. I thought the numbers would be good, but this was very good. I haven't seen a number this good for them in probably 4 or 5 years. As for the stock, I have been recommending it since it was in the low 40s. With the stock up roughly +30% since then, I have trimmed it and am holding the rest for a climb into the 60s.

long KSS

Retail Sales Impress

Morning News of Note:
  • TGT: Heard on the Street... Shoppers Flock to Target, But Not Investors Style-conscious bargain hunters love Target, but investors prefer to shop elsewhere. By almost every measure, Target Corp. is a retailing darling. The Minneapolis-based discounter lures shoppers with its smart-looking products, name-brand designers, airy aisles and affordable prices. Last year, Target racked up a 5.6% gain on sales at stores open at least a year. (Full Story) WSJ
  • XOM: Drilling for Best Large-Cap Oil Stock FOR THOSE STEWING ABOUT the big profits of the big oil companies, the best revenge may be to invest in them. These companies offer safety for conservative investors, with their combination of refining and exploration businesses. When oil prices fall, they tend to produce more consistent earnings than pure plays on exploration, services or refining. (Full Story) BARRONS
  • AAPL: Silent recall issued for some MacBook Pro batteries The problem appears to affect MacBook Pro models with serial numbers up to W8608, suggesting that only those notebooks manufactured during the first two weeks of MacBook Pro production are potentially affected. Apple has reportedly issued a silent recall of batteries showing symptoms that include: the battery level going from a full charge to 90 percent then immediately to no charge; the battery's charge instantly depleting to a single blinking LED; the battery failing to respond at all; or the battery experiencing any other sizable loss of capacity. (Full Story) Apple Insider
  • LCDs: Digitimes reports LCD TV inventory levels in Europe have surged to 6-8 weeks due to strong demand expectations for the World Cup, while inventory levels in the North America market are remaining at normal levels (four to six weeks), according to Eric Wu, head of iSuppli Taiwan. Although demand for LCD TVs in Europe is expected to pick up due to the upcoming sport event, current demand remains lower than expected, Wu indicated. Among the LCD TV inventory, the 32-inch segment is piling up the quickest, as panel makers are ramping capacity at their sixth-generation (6G) plants, explained Wu.
  • SNDK: EE Times reports SanDisk has struck a deal with Philips Semiconductors to embed the Philips SmartMX smartcard controller chip in certain types of flash memory cards to allow them to be used for near-field communications and in particular, when the cards are inserted in mobile phones, to pay for things. The co said the SmartMX would be embedded in TrustedFlash cards allowing consumers to use their phones as bus or train tickets and perform secure "contactless" payments and other contactless transactions by simply waving their phones near a contactless reader in a mass transit turnstile, checkout counters or drive-through windows.
  • Mad Money Summary: Cramer opened his show Wednesday discussing oil. He focused on three oil technology companies that he says are "the lifeblood of the oil technology industry," Core Laboratories (CLB), Dawson Geophysical (DWSN) and FMC Technologies (FTI). Cramer then discussed a Russian stock, Gazprom (GAZP.RU). He said Gazprom is a large, corrupt oil and gas company but owns the largest oil field in the world. In the "Lightning Round," Cramer was bullish on KFx (KFX), Blockbuster (BBI), Goldcorp (GG), Powerwave Technologies (PWAV), Teva Pharmaceutical (TEVA), Dr. Reddy's Laboratories (RDY), Crystallex International (KRY), Agco (AG), Headwaters (HW), Schlumberger (SLB), National Oilwell Varco (NOV), Consol Energy (CNX), Peabody Energy (BTU) and Brown Shoe (BWS), and was bearish on Plug Power (PLUG), King Pharmaceuticals (KG), Broadcom (BRCM), ConAgra (CAG), Imax (IMAX), Bronco Drilling (BRNC) and Steve Madden (SHOO)

Market Comments: The market has opened on a very strong note this morning. Retail sales were stronger than expected (check back for my roundup), for the most part, and the producivity numbers released this morning were solid also.

Oil is trading down again today, which might help the market. Bond yields are flat right now, which is how I would like them to stay for a little while.

In the woulda coulda department, a stock I have liked but never pulled the trigger on is EXPD. The company reported great earnings and the stock is ramping 18% this morning. doh! Another stock that we used to own but sold last year is WFMI. That stock is also rallying nicely on solid earnings.

long XOM,

Quote of the Day

"The real measure of your wealth is how much you'd be worth if you lost all your money." ~ Author Unknown
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Wednesday, May 03, 2006

Another Late Day Bounce

Sorry for the lack of posts today, but client meetings had me tied up.

The market looked like it was heading for one ugly close, but the last hour of trading brought out a nice bounce, such that the ending results really don't look that bad.

Breadth was mildly negative, and volume levels rose on the day. That qualifies for a distribution day, although I would rate it a weak one at best.

Market sectos were mixed for the most part. The only real standout on the upside were the semis, which had a nice day. Energy stocks sold off pretty hard, when the inventory data came in higher than expected and led to a nearly $2 plunge in oil prices.

Retails sales started to come in after the close, and will be out in full force before the open. I saw that CTRN was very strong (+21%). I expect KSS to have a good report in the morning, though the stock has been rallying and likely reflects most good news. I am most worried about URBN, which continues to work through its inventory issues and fashion difficulties.

long KSS, URBN

Early Weakness

Morning News of Note:
  • Piracy: Music Industry to Target CD, DVD Pirates After years of suing Internet users for downloading songs illegally, the music industry is targeting pirates in 12 cities who copy CDs and DVDs for sale at street corners, flea markets, family-run shops and even mainstream record stores. Executives identified the cities as Atlanta; Austin, Texas; Chicago; Dallas; Houston; Los Angeles; Miami; New York; Philadelphia; Providence, R.I.; San Diego and San Francisco (Full Story) Washington Post
  • MSFT YHOO GOOG: A Microsoft, Yahoo Tie-Up? One faction within Microsoft Corp. is promoting a bold strategy in the company's battle with Google Inc: Join forces with Yahoo Inc. That would be a major departure for Microsoft, the software maker that is legendary for toiling on its own until it captures a new market. (Full Story) WSJ
  • EBAY: Skype to Roll Out New Software Skype, the Internet-calling unit of eBay Inc., will introduce the latest version of its new software, packed with improvements, and it will preview a new feature which lets as many as 100 people participate in a live, moderated conversation, an effort to attract more small business users and consumers. The Luxembourg-based subsidiary of Internet auctioneer eBay will release a test version of its new software which lets anyone with an Internet connection make free voice and video calls around the world. (Full Story) WSJ
  • AAPL: Apple boss Steve Jobs won a resounding victory over the record industry this week as the company extended contracts for iTunes that will allow Apple to keep intact the standard 99 cents per-tune price. The four major record companies - Warner Music Group, EMI, Universal Music and SonyBMG - had all been pushing for variable pricing. Executives had sought the ability to charge more for certain popular songs, and less for others. The Post first reported on the imminent defeat for the record labels about two weeks ago. An Apple spokesperson confirmed that contracts had been reached, but declined to reveal terms. An industry source said the deals with the labels were for one year. - AAPL
  • Mad Money Summary: Cramer opened his show discussing Black & Decker (BDK), which is about to unveil a new line of cordless tools which he believes could push the stock to $100 from its close price yesterday of $92.30. Then Cramer discussed Celgene (CELG), which just reported a blow-out quarter. The company also may be a takeover target. Cramer then invited MarketWatch columnist Herb Greenberg onto the show, and the two debated Intuitive Surgical (ISRG) and Atheros Communications (ATHR). The two men agreed that Intuitive had a great quarter, but did not agree on the valuation of Atheros. Greenberg feels Atheros is "expensive by every metric," which Cramer said was dead wrong. Cramer then suggested a cable play in the wake of Comcast's (CMCSA) latest quarter, NTL Holdings (NTLI), which he believes deserves to go much higher to be valued wit Comcast, Time Warner (TWX) and Cablevision (CVC). In the "Lightning Round," Cramer was bullish on DuPont (DD), Eastman Chemical (EMN), Dow Chemical (DOW), Goldcorp (GG), Wachovia (WB), Commerce Bank (CBH), Wells Fargo (WFC), Sasol (SSL), BHP Billiton (BHP), Energy Partner (EPL), @Road (ARDI), Saks (SKS), SunOpta (STKL), Depomed (DEPO), Nektar Therapeutics (NKTR), West Pharmaceutical (WST), Washington Mutual (WM) and Countrywide Financial (CFC), and was bearish on NYSE Group (NYX), Quantum Fuel Systems Technologies Worldwide (QTWW), Ballard Power (BLDP), Evergreen Solar (ESLR), Stillwater Mining (SWC), Nasdaq Stock Market (NDAQ) and MB Financial (MBFI).


Market Comments: The market has opened under pressure this morning. Bond yields are back up at 5.14%, which may be a headwind. Commodities are trading mostly higher as well.

Big-cap earnings reports this morning from PG and TWX have done nothing to help those stocks. I admit I am surprised by the reaction in PG, which I think is doing fine and the selling is overdone. I am also surprised by GRMN. No doubt it was a strong quarter, but the stock is getting up into valuation levels where is has historically become a risky hold.

Biotechs are getting a small bounce, for what feels like the first time in my lifetime, while health insurance stocks are under pressure due to terrible results from Cigna (CI). All in all, tough market.

long GOOG, PG, TWX

Quote of the Day

"Anyone who lives within their means suffers from a lack of imagination." ~ Oscar Wilde
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Tuesday, May 02, 2006

SPX Closes At Its Highs

The SPX closed at a new yearly high today, at 1313 (though not an intraday high). The COMP was also up, but lagged the SPX.

Energy stocks led today's rally, with the group gaining +2.3%. Utilities were also strong, surprisingly, while biotechs continued to lag (-1.12%).

Oil also closed near its highs, at $74.58. The yield on the 10-year fell 2 basis points to 5.11%. Measures of investor anxiety (put/call ratios, volatility indexes) were also lower today.

The strength of this market has to be very frustrating for the bears. It also likely continues to confound those with cash waiting for more of a pullback, a camp I currently find myself in. But each time the market looks like it is poised to move lower, it somehow saves itself.

The SPX has been hovering around this 1310 level for over 6 weeks, and now looks like it might be poised to breakout to new highs. But I wish there were more groups breaking to new highs than just energy and materials. Those groups don't often provide the leadership that sustainable bull markets are made of.

Standout Stocks

Here are some stocks making notable moves on high volume:
  • ADM - high volume breakout to new highs; strong earnings
  • DXPE - adds another 5% to recent rally
  • RES - strong 10% move higher; no news
  • GG - move in gold helps stock extend rally
  • TWGP - strong rally, back near new high; earning related
  • HSII - 15% gap lower, below 50-day; 1Q profit slides
  • TBL - 11% gap lower; lowered guidance
  • OSK - high volume breakdown below 50-day; outlook disappoints
  • ASF - scary 18% plunge; weak guidance
  • UTHR - falls to 8-month lows; earnings related

Biotechs Still Under Liquidation

Morning News of Note:
  • MSFT GOOG: Microsoft and Google Set to Wage Arms Race Bill Gates, the chairman of Microsoft, described Google in an interview late last year as a worthy adversary, a company to test Microsoft's mettle. "This is hypercompetition, make no mistake," Mr. Gates observed. The rivalry between the companies is growing more combative, and with good reason: the outcome is likely to shape the future of competition in computing and the way people use information technology. (Full Story) NY Times
  • MOT: Motorola's Q still standing in line April showers are done. Where is Motorola's Q? The much-anticipated Q, a super-thin e-mail device, had been scheduled for an April launch, but the deadline passed. A launch later this Q, as in quarter, might be in the offing. (Full Story) Chicago Sun Times
  • C: Smith Barney Will Consolidate Foreign Clients Citigroup Inc.'s Smith Barney brokerage unit is planning an aggressive revamping of its oversight of foreign investors' accounts, prompting complaints from brokers who will lose clients under the plan. The plan, aimed at complying with antiterrorism and money-laundering rules, calls for consolidating thousands of foreigners' accounts managed by brokers in more than 400 offices, into about 40 "focus" offices specializing in "Offshore Wealth Services." (Full Story) WSJ
  • GLW: Corning Incorporated announced that its board of directors recently approved a capital expenditure plan of $174 million to further expand its Generation 8 size liquid crystal display glass substrates manufacturing capacity at its facility in Shizuoka, Japan. The company had previously announced that it will ship samples of its Gen 8 size LCD glass from this facility in the second quarter. Corning expects to begin Gen 8 commercial shipments in the third quarter, with this new capacity continuing to come on line through late 2007. In addition, Corning announced that it recently signed a supply agreement making Corning the majority glass substrate supplier for Sharp Corporation's Gen 8 fab in Mie Prefecture, which is currently under construction and expected to open later this year. Sharp's new Gen 8 factory will be focused on LCD TVs that are 40 inches and larger. Corning's new investment will add Gen 8 glass capacity to meet Sharp's future supply requirements
  • Mad Money Summary: Jim Cramer's "Mad Money" Jim Cramer opened his show discussing ethanol. He had previously recommended The Andersons (ANDE), Archer Daniels Midland (ADM) and Agco (AG), and is now recommending MGP Ingredients (MGPI). MGP Ingredients is a food company that just bought a stake in Iogen, a company that turns cellulose into ethanol. He also suggested Union Pacific (UNP), which he believes will be the best-of-breed play on shipping ethanol. Cramer then recommended Toyota (TM), the best hybrid play of the auto makers. Cramer brought up Archer Daniels Midland again, noting that it reports earnings tomorrow. He said if other "high-flying" stocks are an indication, Archer will fall after it reports. Then Cramer discussed the "comeback player of the year," American Standard (ASD), which has turned itself around in an unbelievably short period of time. In the "Lightning Round," Cramer was bullish on Raytheon (RTN), Flextronics International (FLEX), Agilent (A), Red Hat (RHAT), Goldman Sachs (GS), Ceradyne (CRDN), Headwaters (HW), Chartered Semiconductor Manufacturing (CHRT), Informatica (INFA), Home Depot (HD), First Data (FDC), Manitowoc (MTW) and Oshkosh Truck (OSK), and was bearish on Sanmina-SCI (SANM), VA Software (LNUX), Evergreen Solar (ESLR) and InterDigital Communications (IDCC)


Market Comments: The market is getting a bounce at the open. We'll have to see if it can last throughout the session. I would have preferred to see a weak open that reversed higher into the close.

Companies that reported good earnings are seeing their stocks up nicely (see EMR, FSH, ADM, etc.). Energy stocks are up again, and brokers are getting a bounce in early trading as well. But biotechs continue to be sold relentlessly. This has to be the most hated group in the market, as these stocks seem to go down every day. Pretty soon it will be time to add some stocks from that group.

I am still feeling a bit defensive, following yesterday's reversal and also the fact that the overdue pullback remains elusive.

long C, EMR, FSH, GLW, GOOG

Monday, May 01, 2006

Mutual Fund Monthly

I own nearly a dozen funds in retirment accounts for my wife and myself. I like to keep tabs on how other managers are performing, what they're buying and selling, etc. I am amazed at how well some of them are doing.

Here are my Top 5 performing funds:
  1. DREGX: +26.4%
  2. CGMFX: +20.2%
  3. RIMSx: +15.8%
  4. BPTRX: +13.4%
  5. TAVIX: +13.3%

That's pretty good performance for just one quarter. What these funds have in common is a focus on mid-caps or international stocks. The funds that are lagging this year are those that focus on large-cap stocks.

My biggest laggard ytd is Schwab's Hedged Equity Fund (SWHEX), which is only up +1.2%.

long all funds mentioned

LRODs Galore

Last Thursday, the COMP put in a large-range outside day (LROD) to the upside, and the SPX came within a point of doing same. Today, the SPX stages a negative reversal, resulting in another LROD, except this time to the downside. Volume ran below Friday's levels, so it does not qualify as a distribution day.

That makes for a lot of volatility. The COMP broke below its 50-day also. The catalyst for today's late day selloff was comments that Bernanke said that the markets misinterpreted his statements last week, and that it would be a mistake to label him "dovish".

Breadth was mixed, with the A/D line negative on both exchanges, while the Hi/Lo index expanded on both exchanges. Measures of investor anxiety (put/call, VXO/VXN) rose throughout the day, but remain at just average levels.

The brokers continued to be sold today, but profit taking in the group does not alarm me, given the run they had. Most other sectors were also down today, with the exception of energy and materials, and some retail.

Today's Analyst Action

Here are some analyst moves that caught my eye:
  • TRID: Webush Morgan ups from Hold >> Buy
  • X: KeyBank ups from Hold >> Buy
  • PD: Stifel Nicolaus ups from Hold >> Buy
  • ADP: Deutsche ups from Hold >> Buy
  • SYMC: Friedman Billings ups from Mkt. Perf >> Outperform
  • GMR: Jeffries goes from Buy >> Hold
  • RIG: Morgan Stanley goes from Eq-Wgt >> Underweight
  • GRMN: Morgan Stanley ups tgt from $65 >> $69 (huh?)
  • AMT: BofA ups tgt from $36 >> $38
  • LPNT: Ryan, Beck ups target from $34 >> $36

Monday Morning Musings

Morning News of Note:
  • DHI NVR KBH CTX PHM MTH TOL: Heard on the Street... Doing Your Homework To Find a Solid Builder With new-home sales slowing in some parts of the country, investors are anxious to know which builders are prepared to ride out the storm. Figuring that out, though, can be tough because industry analysts are all over the map. "It's really going to be about finding the best companies with the best business models in the best markets," says Margaret Whelan, an analyst at UBS. "It's going to be a stock picker's market." (Full Story) WSJ
  • YHOO: Yahoo Launches a Tech Site With Aim of Aiding Consumers Yahoo Inc. today plans to launch a Web site designed to help consumers research, purchase and learn to use technology products, marking the Internet portal's first new content site in five years. The site, dubbed Yahoo Tech, will provide information on gadgetry in 18 categories, including cellphones, laptops and digital-music players. In each category, Yahoo will highlight the top five products according to Consumer Reports magazine, which is providing product ratings under an exclusive deal. (Full Story) WSJ
  • MSFT: Please Reboot All the folks who dumped Microsoft shares Friday might feel some seller's remorse today. Thursday the world's biggest software company reported a 16% rise in profit. But the company also outlined plans to sink more than $2 billion into new products to fend off rivals like Google Inc (Full Story) WSJ
  • F: Ford May Produce Its Own Reality TV Show Project Runway, meet Monster Garage. That is the gist of a concept executives at the Ford Motor Company are tossing around for a new reality show. While corporate sponsorships of reality shows are nothing new — Ford has been a prominent sponsor of "American Idol" — the company is looking to produce the show itself in the hope of reconnecting with younger consumers who have drifted away to other brands like Honda and Toyota. (Full Story) NY Times
  • Mad Money Summary: Cramer opened his show discussing West Pharmaceutical Services (WST), a drug packaging company around its 52-week high. It makes tamper-proof seals, and has a new catalyst, the inhalable insulin Exubera. Cramer then discussed Aetna's (AET)implosion, and how it caused a selloff in health insurance companies and HMOs. Friday, the Street recognized the selloff was overdone and bounced back in to bull mode. But they left behind HealthSpring (HS), leaving a "major opportunity to make money." Cramer then recommended Perusahaan Perseroan Perseropt PTelekomunikasi Indonesia (TLK), or Telekom Indonesia, as a play in Indonesia. Cramer was then joined by NuVasive (NUVA) chairman and CEO Alexis V. Lukianov. Lukianov said that NuVasive has not given aggressive guidance, but that people are getting excited about the company's great first quarter. In the "Lightning Round," Cramer was bullish on Ultra Petroleum (UPL), Peabody Energy (BTU), Finisar (FNSR), BHP Billiton (BHP), Southern Copper (PCU), Ladish (LDSH), Boeing (BA), Amerada Hess (AHC), Houston Exploration (THX), Hana Biosciences (HNAB) and Energy Partners (EPL), and was bearish on Travelzoo (TZOO), Tanzanian Royalty Exploration (TRE), Moody's (MCO), Covad Communications (DVW) and International Securities Exchange (ISE).


Market Comments: The markets have opened on an up note this morning. Both personal income and personal spending came in above expectations. And Wal-Mart (WMT) reported much stronger retail sales over the weekend, saying April was +6.8% versus guidance of about +4-6%.

That is helping all the retail stocks get a bounce, as well as some analyst comments that April was strong in general, helped by the late Easter this year. Will high gas prices make this a one month phenomenon?

Oil is trading higher so far today, and the energy stocks are up. But bond yields are also higher, with the 10-year rising to 5.11%.

The SPX has been up all 4 months ytd. Will this month bring out the 'Sell in May' camp?

long MSFT

Quote of the Day

"Money won't make you happy...but everybody wants to find out for themselves." ~ Zig Ziglar
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