Thursday, May 31, 2007

Signs of Strength for MEMC Electronics

My Stock of the Day is MEMC Electronics (WFR).
WFR has demonstrated strong fundamentals for a few years now. The company's 1Q earnings report was greeted by investors as a bit disappointing, owing to the fact that the company was supply constrained, and couldn't deliver as many wafers as some thought.
But recent datapoints in the industry point to signs that this situation is improving, and any missed shipments by the company in Q1 will be made up for in Q2. This could lead to upside to the current earnings estimates.
As for the stock, a look at the chart shows that it has been slowly improving since gapping down after reporting earnings. The stock held support in the mid-$50s, and is now bouncing higher again. Today, the stock broke back above its 50-day average, a bullish sign.
I believe the stock can continue to recover, and look for it to go on and make new highs before year-end.
long WFR

Market Hits New Highs, More Indexes Breaking Out

The market finished strong yesterday, and is getting another boost this morning. There was more M&A news, with Wachovia (WB) saying it will buy AG Edwards (AGE) for $6.8 billion. This is helping the broker index break out to new highs, a good sign.

Q1 GDP was revised lower this morning, to +0.6%, a paltry growth rate. But despite the weak reading, bond yields are still moving higher, with the 10-year up to 4.91%. This is likely a sign that the bond market is forecasting a rebound in economic growth going forward, rather than a continued slowing turning into possible recession.

Asian markets rebounded overnight, posting solid gains. And oil is trading lower, near $63. With more refiners coming back online recently, we could see a pullback of prices at the pump as well.

I expect stocks to maintain their bids today, as month-end buying should remain steady.

Wednesday, May 30, 2007

Market Reverses Early Losses, Frustrates Bears

My Stock of the Day is Global Sources (GSOL).
This company is an e-commerce company that facilitates trade with China. The company has solid fundamentals, and is growing at very fast rates. Earnings growth was 50% last quarter, and averaged +70% for the two prior quarters. The company is relatively small, with a market cap of $800 million.
A look at the chart shows that the stock has been contsructing a 3 1/2 month cup-and-handle pattern. Yesterday, it shot out of this basing pattern on a huge spike in volume. This breakout to new highs should be significant. And I expect the stock to continue to rally. What is more impressive is how the stock shook off the weakness in the Asian markets overnight.
The market overall put in another impressive session this morning. The bears' were salivating when they saw the news that China plunged -6.5% overnight. I am sure they thought we were in for another bout of selling like in late February.
But the market likes to frustrate the majority of investors, and it proceeded to shake off the early weakness and build throughout the day. The FOMC minutes provided an additional spark to the market, as it was perceived that Fed officials have become more upbeat about the economy.

Another Shanghai Surprise

The market opened under some selling pressure this morning, after a big plunge in Chinese stocks overnight. The Chinese govt. raised a tax on stock trading, and that caused the stock market there to fall -6.5%, a hefty decline.

The selling spilled over into other Asian markets, as they were down across the board overnight. This is the first "Shanghai Surprise" since late February. But with that market in a bubble, you can be sure it won't be the last.

Recent pullbacks in our markets have been shallow affairs, so it will be interesting to see if this Chinese selloff has any lasting effect on U.S. markets.

Bond yields are down slightly, with the 10-year at 4.86%. And oil is up a bit, to roughly $63.64. But a chart of oil still paints the picture of a commodity under pressure. If oil and gas have peaked for the summer, it would be a bullish sign for investor sentiment.

Tuesday, May 29, 2007

Zumies Selloff Looks Overdone

One of the stock I recommended last week on was Zumiez (ZUMZ).

The company reported earnings last week, so I cautioned that investors might want to only start a small position ahead of the report, in case there was an overreaction to earnings. And that is exactly what happened.

The company reported solid earnings, but the market only rewards a stock when the company handily beats estimates and raises guidance. Although ZUMZ did not do this, they still reported very solid growth. And that growth should continue.

My thesis did not depend on a single earnings report, but rather the attractive growth rates ahead at which I believe the company can continue to grow. There are not that many retailers growing at the rate of ZUMZ. As such, I think the stock can continue to garner a premium multiple in the market.

The company currently operates roughly 223 stores in 23 states. This leaves a lot of room for expansion as the company continues to rollout new stores and build out their national footprint. They cater to youngsters age 12-24, and focus on the alternative and extrmeme sports enthusiasts. I can relate to this demographic, as I used to be involved in these sports when I was growing up. But back then, instead of calling us "extreme" athletes, they just called my brother and me crazy.

Also, there are plenty of skeptics on the stock. The most recent short interest figures show that as a percent of float, short interest in the stock stood at a hefty 29%. That could result in a lot of short covering if and when the stock recovers and goes back to new highs.

A look at the chart above shows that the stock is now hitting some meaningful support. If this holds, I think the stock will begin to form a solid base from which it can then move higher.

More M&A News After The Long Weekend

Hope you had a good Memorial Day weekend. The market is getting an early bounce on more M&A news this morning.

RBS Group is raising its bid for ABN Amro (ABN) to $95.5 billion. URS Corp (URS) agreed to pay $2.6 billion for Washington Group (WNG). Avaya (AV) is reportedly in talks with Silver Lake Partners to go private, and CDWC is also reportedly in talks. Also Archstone-Smith (ASN) is rumored to being bought for $12 billion. All of the above stocks are up nicely so far.

Sentiment got a boost this morning when the Consumer Confidence index came out at 108.0 vs. 104.5 consensus. It also helps that oil is falling a buck this morning, to $64.11. Bond yields are up slightly, with the 10-year at 4.87%.

Asian markets were mostly higher overnight, and the Yen continues to be subdued versus the dollar. We don't want to see a sharp rally in the Yen, because that always freaks out investors who worry about the Yen carry trade.

There are lots and lots of economic reports packed into this shortened trading week, so it should be interesting. There are also a couple of notable earnings reports coming in.

Saturday, May 26, 2007

Weekly Wrap

The week started quietly. The focus was, as in recent weeks, on mergers and acquisitions.

Deals this past week included Alltel going private for $27.5 billion, General Electric selling its plastics unit for $11.6 billion, Hologic buying Cytyc for $6.2 billion, a unit of Morgan Stanley buying Crescent Real Estate for $6.5 billion, Payless ShoeSource buying Stride Rite for $800 million, Coca-Cola buying Glaceau for $4.1 billion, and Nasdaq buying Nordic exchange OMX for $3.7 billion.

In addition, Tracinda Corp. expressed an interest in buying the Bellagio from MGM Mirage, China invested $3 billion in private equity fund Blackstone, and Alcan rejected Alcoa's takeover offer attempt amidst talk of a higher bid from BHP Billiton.

The liquidity theme topped the headlines and kept the gains from the recent rally intact. The S&P was up 2 points on Monday, down 1 point on Tuesday, and down 2 points on Wednesday.

Then the focus shifted abruptly on Thursday.

To read more of's wrap-up (on Yahoo Finance), click here

Friday, May 25, 2007

Will Yesterday Be Another One-Day Selloff?

The markets took a bit of a tumble yesterday, and there was really no big news to hang your hat on. It was just one of those profit-taking selloffs that come after a long stretch of gains.

This morning, the market is getting its usual bounce. But the question on trader's minds (you know I don't like up opens), is if the strong open is setting us up for a reversal later today? I would not be surprised to see additional profit taking ahead of the long holiday weekend.

There was more M&A news this morning, with Coke (KO) buying Glaceau and Nasdaq (NDAQ) buying the Nordic bourse. There were also buyback announcements from LOW, ABC, and EQR.

Existing home sales came out weaker than expected, though it didn't weigh on the market much. Oil is bouncing ($64.88) after yesterday's plunge, and the 10-year is stable at 4.85%. I think the 10-year yield is ready to rest after a big 2-week run.

Thursday, May 24, 2007

Research In Motion Bucking Today's Weakness

My Stock of the day is Research In Motion (RIMM).
The stock is bucking today's weakness in the overall market, currently up nearly $5 on the day.
Also, the stock is rising on a big uptick in volume. The list of stocks rising today on strong volume is extremely thin, so the action in RIMM is notable. The stock did get an upgrade from Merrill this morning, where the analyst raised his price target to $190.
I think the stock looks like it needs to rest a bit, but the improvement in relative strength is notable. And I think after some consolidation of its recent gains, it should move higher again.

Market Gets More Good News From Unlikely Housing Sector

The market opened relatively flat, but then got a big boost from better than expected housing data. New home sales rose +16.2% last month, the biggest jump in 14 years. While this number may be a one-off, it is still a good sign that the housing market is well into its bottoming process, and should be less of a drag on the economy going forward.

On the earnings front, Network Appliance (NTAP) warned that it will miss estimates, and its stock gapped down -12%.

Greenspan's comments yesterday about a potential bubble in China weighed on the market late in the day, but can you blame him. The Shanghai index is up +180% in the last year. Do you remember what happened the last time we say an index rise that much in such a short period?

Despite his comments, Asian markets were only slightly lower overnight. Bond yields are still rising, with the 10-year at 4.89%. And oil is down a bit to $65.55.

Wednesday, May 23, 2007

Looks Like A Bottom For Las Vegas Sands

It looks like the bottom is in for Las Vegas Sands (LVS).

Yesterday, Kirk Kerkorian made headlines that he was interested in buying the Bellagio. This caused all of the Vegas gaming stocks to rally, as it signaled there is a lot more value in these properties than current valuations suggest.

Taking a look at one of my favs, LVS, we see that the stock vaulted higher yesterday, on surging volume. It was the highest volume since January 11, 2007. And the gap higher in the chart depicts how the buying pressure was overwhelming from the start of the session.

I believe LVS has broken the recent downtrend in which the stock has been mired. It still has more work ahead of it, but I think slowly but surely these overhead levels of resistance will be chipped away at.

The company has some major properties opening this summer, and that could give an additional boost to the stock. I think investors will start to get excited about LVS in anticipation of these openings.

long LVS

Relentless M&A News Continues To Drive Stocks

I apologize for the lack of posts lately. I have been in and out of meetings, and busy with general office stuff.

The market continues its non-stop acension, with the S&P 500 again trying to close at a new high. This morning there was a slew of M&A news. Alcan (AL) rejected Alcoa's (AA) hostile bid, and is in talks with BHP. Morgan Stanley (MS) is paying $6.5 billion for Crescent Real Estate (CEI), and Payless ShoeSource (PSS) said it is paying $800 million for Stride Rite (SRR), pushing the stock +30% higher.

On the earnings front, Boeing (BA) reiterated guidance. Medtronic (MDT) beat estimates, and the stock is up +6%. And Target (TGT) reported good earnings, and that stocks is also up +4%.

Asian markets were mixed overnight. Oil is up slightly, to $65.75, and bond yields are steady, with the 10-year yield at 4.83%.

Tuesday, May 22, 2007

M&A News Enters The Gaming Sector

The S&P 500 was poised to close at a new all-time high yesterday, but faded into the close to miss the mark. It needs to close above 1527 to achieve this feat, but it's all-time intraday high from March 2000 is actually 1553.

The market was a touch soft at the open, but some sectors such as homebuilders and biotechs were bucking the weakness.

In M&A news, Kirk Kerkorian's company announced it wants to buy MGM's Bellagio and CityCenter. The news spiked MGM's stock +30%, and also put a bid under LVS, WYNN, BYD, etc.

Asian markets were mixed overnight; bond yields are steady with the 10-year at 4.79%; and the new oil contract is trading, down -$0.70 to $65.50. All of the energy stocks have been on an absolute tear recently, especially natural gas stocks.

long LVS

Monday, May 21, 2007

Stock of the Day

My Stock of the Day is NYSE Euronext (NYX).

The stock has been mired in a downtrend since peaking at 112 right before Thanksgiving. The stock had just enjoyed a nice run from 75, and was due for a rest. But since then, it has made a series of lower highs and lower lows, recently testing the 80 support level.

The stock vaulted +5% higher today, on little news. There was some recommendations made on, but no big analyst upgrades or anything.

At 25x next year's earnings, I don't think the stock is expensive given its unprecented global brand and reach. The frenzy amongst exchange stocks makes it likely that NYX can not only maintain, but possibly expand its multiple. And it is entirely plausible that earnings estimates for next year prove too conservative once all of the cost cutting and merger synergies have time to come to fruition.

The stock still has some work to do, but today's volume surge is a good sign that there is more upside ahead. The stock broke above its overhead 200-day today, and I think it will also penetrate its overhead 50-day in the near future.

long NYX

Monday Morning Musings

The market is opening on an up note again, with the usual Monday morning M&A activity.

GE confirmed the sale of its pastic division for $11.6 billion; Alltel (AT) got a buyout for $27.5 billion; Hologic (HOLX) agreed to buy Cytyc (CYTC) for $6.2 billion ; and China is reportedly investing $3 billion in Blackstone, which is slated to go public soon.

On the earnings front, Lowes (LOW) reported weak earnings and guidance, which is not all that surprising given the state of the housing market. The stock is off -3% in early trading.

Asian markets were higher overnight, while the Yen is lower again versus the dollar. Oil is trading lower, near $64.50, and bond yields are a bit higher with the 10-year yield at 4.81%.

The big rise in bond yields and oil prices has not stopped the advance in the stock market, highlighting what I believe to be strong support that equity valuations still have room to expand.

Friday, May 18, 2007

This and That: This Week's Links of Interest

M&A News Ahead of the Weekend Boosts Stocks

Normally, you would expect to hear this M&A news on Monday, but a couple of reports this morning jumped the gun and helped boost stocks.

GE announced that it is close to a deal to sell its plastics division for $11 billion. And Microsoft (MSFT) said it will buy aQuantive (AQNT) for $66.50, an 85% premium.

Also, Kohl's (KSS) reported solid earnings last night, and Bernstein upgraded the brokers this morning. The Univ. of Michigan consumer sentiment index came in better than expected (88.7 vs. 86.5). I guess the rising stock market may finally be making people feel a little bit better.

As for oil, it continues to rise, hitting $65.50, but not denting the progress of the stock market. Bond yields are rising also, with the 10-year reaching 4.77%. This surpasses the April highs, but the January highs were 4.90%.

Asian markets were lower overnight. China raised rates again, in an attempt to cool its overheating economy and mad rush into its stock markets. Bubbles can be great while they last, but the aftermath likely won't be pretty.

Thursday, May 17, 2007

Stock of the Day

My Stock of the Day is actually an ETF, the iShares Real Estate fund (IYR).
With all the talk about whether the housing market has bottomed or not, I thought it was telling that the IYR is breaking below its 200-day average currently.
Actually, the IYR is a basket of many of the largest publicly traded REITs, and has exposure to the commercial real estate market, apartments, hotels, etc.
The stock has been bouncing around support between 84-86, but in the last few days it has broken below that support, and on increasing volume. In fact, a look at the chart shows that all of the high volume days this year have come on down days. Not a good trend.
The stock is oversold now, so it should bounce. But I think that the 84 level will act as resistance now. As such, it looks like this ETF is headed for more of a correction. And that likely means that any talk of a bottom in the real estate market is premature.

Bernanke Reassures Markets That Subprime Contagion Contained

The markets are lower in early trading, but not by much. Fed Chairman Bernanke made a speech this morning about the subprime lending market. He said he does not expect significant spillovers to hurt the rest of the economy, but he does not want to see credit lending restricted by such an amount that it restrains our financial system.

Retail stocks are strongest out of the gate this morning. KSS reports earnings after the close. And last night, HPQ reported a strong quarter and guidance.

Jobless claims unexpectedly fell in this morning's report, indicating that the labor market remains strong. This is pushing bond yields higher, with the 10-year at 4.73%, approaching its April highs near 4.77%. Oil is also a bit higher, trading at $62.90.

Asian markets were mixed overnight, and the Yen is lower once again versus the dollar. Yesterday's session showed a surprisingly strong run into the close. I think today will be more of a quiet consolidation day.

Wednesday, May 16, 2007

Stock of the Day

ICICI Bank (IBN) is showing surprising strength. The company is a broadly diversified financial institution and bank in Inida, its 2nd largest. And growth has been on a torrid pace.

But the stock has been volatile recently. This is because rates are going up in India, and the perception is that this would weigh on financials. I spoke with my best India contact, and he told me that just because rates are moving higher doesn't mean that credit demand won't continue among India's burgeoning consumer base.

I was worried about my position a little last week, but what a difference a week makes. Today, the stock is vaulting more than 6% higher on a huge spike in volume. The stock is also hitting a new 52-week high. The volume confirmation is encouraging, and indicates more new highs to come.

long IBN

SiRF's Up: Selloff Looks Overdone

I sold my shares of SIRF back in February when the stock broke above $30. I have traded SIRF on and off over the last few years, and have always made money selling it above $30 and buying it back in the $20s.
I still firmly believe in the fundamental story at the company. SIRF is benefitting from the GPS wave of personal navigation devices (PNDs), and riding the growth of Garmin, Magellan, TomTom, etc.
But this year, the big growth story is the rollout of location-based services (LBS) among the big cellular providers. LBS should be a big opportunity, as GPS-enabled handsets get rolled out. And SIRF has lots of design wins already with these wireless carriers.
Nonetheless, the stock has been in a funk since reporting earnings. The selloff has continued unabated for almost a month now. I think it is overdone, and although there is no obvious levels of support being hit right now, I am buying back my positions.
Short interest has also grown by large amounts. As of April, 23% of the float was sold short. That could spark a lot of short covering, if and when. I think the stock will rise back to the 30s at some point this year, offering an attractive opportunity from today's levels.
long SIRF

Investors Bid Up Stocks Of The Billionaire Crowd

The market is getting a bounce at the open, reversing yesterday's weak finish. Large-cap stocks are leading the way, after it was disclosed that Warren Buffet doubled his stake in JNJ, Eddie Lampert bought an $800 million stake in Citigroup (C), and George Sorors doubled his investment in MSFT.

AMAT reported okay earnings, but gave soft guidance. That has the stock down -4.5%, and is weighing on the semi group. Energy stocks are also mostly lower as oil trades down again, near $62.45.

Asian markets were up slightly overnight. And bond yields are steady at 4.70%.

Given the run the market has enjoyed, I am still looking to hedge some of my recent gains, and wait for at least a small pullback. I know this strategy hasn't worked well most of the year, but that's my plan and I'm sticking to it.

Tuesday, May 15, 2007

Hedging My Gains in Crocs (CROX)

One of my long positions is Crocs (CROX). Although, to be honest, I have traded around this position and didn't fully take advantage of the recent spike.

The stock gapped higher after crushing consensus earnings estimates, and materially raising guidance. There is also huge short interest in the stock, which sparked a short covering squeeze as well.

I still think the stock has more upside longer-term, but the recent runup has moved the stock deep into overbought territory. A look at the RSI and stochastic indicators above confirm this view. Today, the company signed another licensing agreement and the stock is up +3.5%.

As such, I have hedged my recent gains, and will wait for a period of consolidation for the stock to find support before I remove those hedges and resume my long exposure to the stock.

long CROX; short calls

More Benign Inflation Data

The market is getting a boost at the open, on the heels of a better-than-expected inflation report. The year/year core CPI rate fell to +2.3% in April from +2.5% in March. This is within the Fed's "comfort zone", and improves the outlook for inflation expectations.

The Dow is also up this morning, despite both Home Depot (HD) and Wal-Mart (WMT) being lower after reporting earnings. Earnings season is winding down, and for another quater, the S&P 500 earnings growth looks like it will come in much higher than initial analyst forecasts.

Bond yields are steady after the CPI report (4.67%). Asian markets were lower overnight, and the Yen is lower again vs. the dollar.

This morning, we will get the NAR metropolitan home sales report, which will be very interesting. We all know that the housing market is weak, but this report will tell us if the formerly hottest regions continue to deteriorate, and if the regions that have been strong lately continue to show resilience.

Monday, May 14, 2007

Monday Morning Musings

The market is getting a bit of a bounce in early trading, following Friday's strong and surprising showing on the heels of that benign inflation report.

Tomorrow, we will get the CPI report, which tends to be a more closely watched measure of inflation.

The big M&A news over the weekend is that Cerberus Capital Mgt. is buying an 80% stake in Daimler Chrysler (DCX) for $7.41 billion. Also, Nokia (NOK) raised its Q2 guidance and the stock gapped higher this morning.

Asian markets were up strongly overnight, with the Hang Seng surging +2.5% to new highs. The 10-year yield is steady at 4.67%, and oil is slightly higher near $62.60.

The overwhelming majority of the votes that came in for last month's poll, of what you would like to see more of on this blog, was for more stock ideas (and technical analysis). Thus, starting this week I will offer more stock ideas and trades, and less market updates.

Friday, May 11, 2007

More Datapoints Lining Up To Support A Fed Rate Cut

I'm getting a late start blogging this morning, but the markets are bouncing back from yesterday's drubbing in a big way.

The core PPI came in lower than expected this morning, pushing the year/year inflation rate to +1.5%. This is well within the Fed's targeted range, but more importantly, it indicates that inflation pressures are easing.

This is the third major datapoint that helps make the case that the Fed could cut rates sooner rather than later. The first was the very weak employment report we got last Friday. Then, yesterday's retail sales figures were terrible, very weak. And today, we get a report that inflation pressures are easing.

The market agrees with this assessment, and that is why we are seeing such a positive response in terms of stock action today. And bond yields are moving slightly lower, with the 10-year yield hitting 4.60% earlier today.

Thursday, May 10, 2007

The Bears Finally Enjoy A Day In The Sun

The market finally experienced its overdue selloff today. Large-caps fell -1.36%, while small-caps are down -1.92%. Semis, biotechs, and homebuilders are all down more than -2.0% on the day.

One of the silver linings for today is that the ARMS Index soared as high as 2.30, and the CBOE put/call index was well above 1.0 all day. This is good because it shows the investor fear picked up almost immediately. I would be more worried if this selloff was met with overwhelming complacency.

I suspect that this selloff will last a few days, with some weakness from overseas markets as well. But I believe that it will be another mild pullback, not like the correction that began in May of last year and endured for several months.

Have Buyers Changed Their View of Whole Foods Market?

Where do you shop for natural or organic foods?

Whole Foods

Wild Oats

Trader Joes


Regular grocery store free polls

Whole Foods (WFMI) reported weak earnings last night. The CEO made a comment that the company's products are no longer as differentiated as they used to be, implying the competition has caught up.

This makes it tough for the company to continue charging premium pricing for its products. I still shop at WFMI, as I like the offerings they have. My local Ralph's doesn't have a big organic section. But I'm curious, if you buy organic/natural foods regularly, where do you shop?


Retail Sales Come In Worse Than Expected, Weigh On Market

I am beginning to sound like a broken record talking about the item of the day that is weighing on the market in early trading, only to see it fade by the end of the day and for the market to recover its losses. Of course, one of these days a weak open will stick, as we are overdue for at least a small pullback.

Retail sales reports were much weaker than expected, with a handful of companies reporting double digit declines in April sales. I don't think it is the start of a new trend, but it should help get the Fed's attention along with last month's weak jobs report. Remember, we don't want the Fed to wait until its too late to finally cut interest rates, as they have a history of doing.

There were also some weak earnings reports from WFMI, SLE, and DISH, and an earnings warning from HSY (where is the help from the weak dollar?). The Trade Deficit also come in wider than expected ($63.9 billion vs. $60.0 billion).

Asian markets were slighlty down overnight, and the Yen is lower vs. the dollar again (this is good). Oil is up this morning, back above $62, and bond yields are steady at 4.65%.

Despite the weak retail sales figures, the RLX is moving into positive territory as I write this. Go figure.

Wednesday, May 09, 2007

As Expected, FOMC Holds Rates Steady

The FOMC announced this morning that they were keeping rates steady at 5.25%. Here are some of the highlights from their accompanying statement:
  • The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
  • Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing.
  • Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters.
  • Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
  • In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected.
  • Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

'Wall Street' sequel

I am hearing lots of talk about the sequel to 1987's 'Wall Street', where Michael Douglas played the infamous Gordon Gekko.

The new film is reportedly going to be called Money Never Sleeps, a quote from the original movie when Gekko calls Bud Foxx early one morning from his gigantic 80s-style cell phone.

Here is a link to some info. about the movie--

Stock Market Fever in China

Someone pointed out this article to me, reprinted from China Daily. You have to read this:

Bosses battle stock fever

SHANGHAI: Grabbing a piece of the country's bullish stock market has become something of a national passion, and the only people not excited about the situation are the many bosses out there struggling to keep their employees focused on their work rather than their portfolios.

So far, the stock market has climbed more than 40 percent this year, building on last year's meteoric 130 percent rise. Not surprisingly, people from across the country have been trying to get a piece.

More than 11 million new trading accounts have been opened since the beginning of this year, or twice the total number opened last year, according to the China Securities Depository and Clearing Co Ltd.

Altogether, there are now 90 million trading accounts in China, accounting for 7 percent of the country's 1.3 billion population.

The growing ranks of investors are not just pouring money into the market they are diverting an increasing amount of energy to it.

"It would be a shame to miss out on such bullish conditions after so many years of a bear market," said an editor at a leading news Web portal in Beijing, who requested to remain anonymous.

Some offices have become virtual trading floors during trading hours - 9:30 am-11:30 am and then 1 pm-3 pm - some local newspapers have reported.

People can be seen exchanging trading tips and stock picks over instant messaging programs like MSN and QQ during trading hours. Their work often suffers as a result.

And in some places of business, it is now considered poor form to disturb a staff member or government office worker during trading hours, newspapers have reported. (I added italics for emphasis)

"The problem has become more acute with every increase in the market," said Tang Liang, who runs a small trading company in Hangzhou, the capital city of East China's Zhejiang Province.
But the young boss said he was taking a relatively relaxed attitude toward the problem.

"I discourage my staff from diverting too much energy to stock trading during working hours," the manager said.

Hurry Up And Wait (for the Fed)

The market is opening under a bit of weakness, but it seems like lately every time we see this, the market recovers by the end of the trading session. Today, the FOMC meets, and while it is widely expected to hold rates steady for the 7th consecutive meeting, it will be interesting to see if they change their directive (comments) about the economy and inflation.

CSCO reported good earnings last night, but lackluster guidance has the stock getting hit for -6%. DIS was also pretty good, but sales were a little light, and the stock is down slightly. A Goldman upgrade of IBM is helping that stock break to new highs.

In the M&A world, there is chatter that RTP could be taken out by BHP, and that has the stock gapping +6% higher. There is also news that AT could be taken private.

Bonds are steady ahead of the Fed meeting, with the 10-year yield at 4.64%. Oil is slightly lower at $62.20. The real problem is with the refiners, where bottlenecks in production are keeping prices at the pumps high. My corner had (regular) gas for $2.71 this morning. Will this crimp the summer driving season?

long GS

Tuesday, May 08, 2007

Investor Sentiment Check

Investor sentiment guages have been running at elevated levels today, which is probably one of the reasons that the market made its low very early, and has been bouncing. The Nasdaq 100 has climbed all the way back into positive territory.

  • The ARMS Index is above-average at 1.05
  • The CBOE put/call ratio is high at 1.12
  • The ISEE is at the low level of 114

I think most people saw this morning's weakness and assumed it would continue for the remainder of the session. Days like today continue to be very frustrating for the bears, who just cannot gain any traction.

Here are some stocks making notable, high-volume moves:

  • Rising Stocks
  • Falling Stocks

Candleglance Charts and more

Looking For A Pullback

The Dow closed higher yesterday, making it the 24th up session out of the last 27. That's quite a streak, and has not occurred since 1927. But the market is not heavily overbought. So while it could certainly pullback at any time, the pullback could again be short and shallow.

Traders are locking in profits this morning, as the market has opened on a weak note. HPQ raised guidance , helping that stock buck the weakness. And more M&A in the steel sector, as MT makes a bid for AKS.

Asian markets were down a little overnight. The 10-year yield is breaking below its 50-day to 4.62%. And oil is roughly flat today, trading near $61.50.

I have raised some cash in my portfolios, and would welcome a pullback to put some of it back to work. Abby Joseph Cohen raised her full year target for the S&P 500 to 1600, but I still expect those levels to be exceeded.

Monday, May 07, 2007

Hanging Tough

My Stock of the Day is Zumiez (ZUMZ).
This company is a clothing and accessory company that sells products to mostly kids and teens that are into alternative sports (snowboarding, skateboarding, surfing, etc.). The company is growing like mad, and continues to pose impressive earnings.
The stock has just recently come off its highs to test its 50-day moving average. It looks like a successful retest, and today the stock is bouncing higher on a big jump in volume.
I don't yet have a position in this stock, but it looks very attractive, and I think this one works higher.
Other stocks making notable, high-volume moves include:
  • Rising Stocks


  • Falling Stocks


long LVS

Bears Wondering If The Market Will Ever Go Down Again?

One of my short selling colleagues said Sisyphus had it easier than the short-sellers do today. The S&P 500 rose 0.77% last week, making it the 5th consecutive week of gains for the senior index. The Nasdaq 100 gained only 0.25%, also for the 5th straight week.

There was some more M&A news this morning. Alcoa (AA) is bidding for rival Alcan (AL) again, and Armor Holdings (AH) is being acquired by BAE Systems.

Bond yields are steady at 4.64%, while oil is falling again, down to $61.50. Interesting that while everyone was out there predicting $70 oil by Memorial Day, crude can't seem to gain any upside traction.

Asian markets were higher overnight, and our markets are up in early trading as well. Brokers are giving back some recent gains so far, while materials stocks are powering higher.

Friday, May 04, 2007

Amazon Trade Update

After AMZN experienced that 2-day mega spike higher, I took a nice sized short position in the stock. My goal was just for a short-term trade, as I felt the outsized move was unjustified and overdone.

I figured it was all a big short squeeze, and that the stock would likely give back a few points very quickly. But after a few days, it didn't fall at all. A look at the chart above shows that the stock just hovered in a state of suspended animation.

That worried me, so on Wednesday I closed out my short position for a tiny loss. Today, the stock is moving higher again, and breaking above its recent highs. I think this is a good example of employing risk management to your trading.

Everything Keeps Coming Up Roses

The market is getting another boost in early trading, despite a weaker than expected jobs report. The payrolls report before the open showed a gain of 88,000 jobs, the weakest in 2 years. Moreover, it was the first time in 11 months that the prior month's figures were revised lower.

But there was some positive inflation implications in the numbers, and the bond market rallied on the news, as it improves the odds that the Fed cuts rates sooner rather than later. The yield on the 10-year is lower at 4.64%. For its part, oil is flat around $63.

Another positive sign for investors is the continued M&A activity. The New York Post is saying that Microsoft (MSFT) has approached Yahoo (YHOO) about a deal. I view this as unlikely, and think the two companies would be better off trying to create some targeted partnerships or joint ventures. Also, Reuters (RTRSY) confirmed it has received a takeover solicitation.

This market continues to plod forward like the energizer bunny. They say traders are superstitious, maybe that's why I havent' changed my socks in 25 days!

Thursday, May 03, 2007

Starbucks Reports Earnings After The Close

My colleague Doug Kass and I were debating the merits of Starbucks (SBUX) on the Street Insight website.

Doug has been short the stock, and has probably made good money since the stock peaked last October.

But I think that the bottom for the near-term is in. I believe the company is about to begin lapping easier comparisons, which will alleviate some of the recent margin pressure. I would be more worried about the stock if I thought growth was slowing, but it continues at a torrid pace.

I can think of few stocks with the combination of better management and a better growth outlook, especially international. If and when growth stocks at large come back into favor, SBUX stands to do well.

long sbux

S&P 500 Hits 1500 Level

You're going to hear all day about how the SPX hit the 1500 level. So let's get it out of the way. Like the Dow hitting 13,000, it's just a round number. The SPX really needs to get above 1550 to surpass its all-time highs from the year 2000. That would be a much more meaningful headline.

The markets are getting a small bounce in early trading, after a very solid day yesterday. Earnings continue to come in better than expected, and with good economic news coming in, there isn't much that can keep this market down.

This morning, the ISM Services index came in strong (56.0 vs. 53.0 consensus), and a key inflation report (unit labor costs) rose less than expected. That is good news on the inflation front. Oil is also falling again today, now hovering below the $63 level. The 10-year yield is up slightly to 4.67%.

EXPD reported strong earnings this morning, and made positive comments on the economy. They have a good handle on the global economy at large, so their outlook is important. On the flip side, GM reported weak results (I know, shocking) on large losses at GMAC amid all the subprime weakness.

long EXPD

Wednesday, May 02, 2007

Stocks Shake Off Weak Employment Report In Early Trading

The market is strong out of the gate. I don't want to sound like a broken record, but you know how I feel about strong opens.

There were more solid earnings reports this morning. You can check out TWX, RIG, YUM, and RIG, just to name a few. There was also another buyout this morning. The Dolan family confirmed it will buy Cablevision (CVC) for $10.5 billion. This is about 20% higher that the family's previous offer. And yesterday, Dow Jones spiked +50% higher on speculation that News Corp (NWS) may start a bidding war for the company.

On the economic front, the ADP employment report was fairly weak, and would imply that this Friday's payrolls figure comes in below the consensus of 100,000. But bond yields are flat, with the 10-year at 4.65%.

Asian markets were higher overnight, and oil is lower again today after a sharp reversal lower yesterday. It is hovering closer to $64 now. (see chart of USO above)
The market continues to defy the bears, and work its way higher. Remember that price is the final arbiter. Sitting there and asking "why?" will just cost you money.

Tuesday, May 01, 2007

MEMC Electronic Trading At Attractive Valuation

MEMC Electronic (WFR) has experienced a sharp pullback since reporting earnings last week. After 2 years of beating estimates, I think investors were hoping for another big beat. The company still reported verys solid results, but I think a lot of momentum investors had become involved, and simply sold on the news.

WFR reported a big jump in earnings, and gross margins exceeded 50%, which is impressive. Management also indicated that it expected further margin improvement going forward, as solar sales to some big customers ramp up.

I think investors may be too focused on the lackluster semiconductor business. But solar business remains robust, and I don't think the supply/demand imbalance will be fixed until well into 2008 (some analysts predict 2H09 at the earliest).

The selloff has been sharp. You can see in the chart above that the stock is getting very oversold, on both the RSI and stochastics. And valuation has become compelling. At current levels, the stock is trading for roughly 13x next year's earnings. That is roughly half its expected growth rate.

I think this is an overreaction, and that the stock is a good value here. Even though it is hard to tell exactly when it will bottom, I added to my long position this morning.

long WFR

Retail Stocks Weighing On The Market

Lots of crosscurrents in the market this morning. Some weak earnings reports from LIZ, CC, and UA are really weighing on the retail stocks. Centex (CTX) also said its results were disappointing, and that they are facing one of the most difficult markets in 25 years.

It didn't help that this morning's pending home sales report came in at -4.9% vs. expectations for +0.4%. That's quite a bit of weakness. I don't think the homebuilders have bottomed yet.

The ISM Index was strong at 54.7 vs. 51.0 consensus. This report is volatile, but it does show a strong bounce in the manufacturing sector. While housing is weak, industrial production is strong.

Asian markets were lower overnight, and oil is down a bit also this morning. Bond yields are a touch higher, with the 10-year yield at 4.65%. But selling pressure is heavy. The ARMS Index is already at 1.50, and the put/call was elevated yesterday as well.