Today’s sell off cant be ignored or dismissed. It is possible for the bears to remain in control for a while, I have seen it plenty of times.
However, the indicators I watch are already in extreme bear territory which generally one sees at the end of a down trend, not the beginning.
My guess is this downward move happened so quickly, unlike previous bear runs, long time traders who run money are having a hard time believing the bottom is already here.
Again we practice parking money in good places at Trademechanic, instead of running for the hills every time the market gets a hiccup. You saw the results of this play out last Friday in shares of BOOM, which advanced 13% for us, while the market corrected.
We cant catch these moves unless we own the stocks. They are not going to wave the all clear flag and the I am going higher by 13% today banner.
The key is low beta, low p/e, high growth. It’s like Novocain, give it time, always works.—Jon
Aside from our common love of investing, it is hard to find similarities between Mr. Sykes and me. He trades rapidly and aggressively; I trade infrequently. He relies on momentum; I resist momentum. He became a professional investor early in life, and has always worked for himself; I became a professional investor later in life (38), and have always worked for others. Loss control for Mr. Sykes is a fast hand on the sell button (or the buy button if he is short); for me it is diversification, margin of safety, etc.
1. 40% of all stocks are in a decline, and have been for a while, even though the market averages make it seem like a downturn has just begun. Nobody believes in these markets.
4. New short sell rule makes it too easy for those who do not have sufficient experience trading stocks to get caught on the wrong side of the trade
5. Top companies average growth rates exceed 20%, while the market P/E multiple remains under 18. We can go much higher.
6. Foreign investors are sitting on big gains from their own markets that have become expensive. Example, CHINA trades at 50xs earnings.
7. A reaccelerating US economy will only add to the overseas profits already being realized by US companies, creating further distance between analyst estimates and actual reported numbers.
8. Little retail participation is in the current stock market, as the average investor sits on the side lines along with many institutional players.
9. Technology investment upgrade cycle, including but not limited to broadband, pc, gaming, and corporate spending.
Bottom line, this market is on solid footing based on real earnings that are accelerating. These improved fundamentals are not reflected in most company stocks that are at or near their 52 week lows.
This is a great investing environment for the swing and long term traders which will provide many opportunities to realize above average historical returns.—Jon
Grow is a recent addition to the Russell 2000, and of course we would all like to know when some money is going to go back into that group pushing our GROW back up to a new 52 week high, so I thought a chart of the Russell would be good right now.
As we can see, the Russell 2000 broke solidly below its 40 Week EMA (blue line) which is equivalent to its 200 Day EMA.
In the past when the Russell 2000 has gone through a correction after making a significant move higher finds support usually at its 90 Week EMA (green line) as denoted by points A. Currently the 90 Week EMA is near 760, so we will be watching for possible interest at that level or higher.--Jon
We are removing over 70 stocks from trade consideration this week and adding in 23 stocks for trading consideration. Because the size of the removals is substantial, we will not list those.
SWIR, TBSI, VOCS, CHKP, BOBJ, GGL, JDAS, NVT, CHL, SJR, KEX, LRCX, VDSI, AIRM, SNDK, LPHI, GPRO, SIGM, RADS, VSEA, ARTC, CYMI, KYPHI am taking us to Green Light Trading, all industry sectors are fair game to trade if they meet our momentum and value criteria.
I feel market risk/reward is favorable for the bulls, with possible 200-500 points left to move lower on the DOW, verses 2000 points to the upside by Christmas.—Jon
Wednesday Re-Cap by JONAH KERI July 25th
Stocks staged an up-and-down session Wednesday, closing moderately higher in mixed volume.
The Nasdaq gapped up at the opening bell. It then pulled back, before bouncing higher again late in the day. The tech-laden index closed up 0.3%.
The NYSE composite rose 0.2%. The S&P 500 and Dow industrials climbed 0.5% each.
Nasdaq volume ebbed. But NYSE turnover picked up, offering a more encouraging sign of institutional buying.
That lukewarm action came a day after the major indexes sold off in heavy volume, casting doubt on the market's rally. Leading stocks sold off especially hard on Tuesday, as the market recorded its biggest single-day loss in nearly five months.
Amazon got Wednesday's session off to a more promising start after smashing estimates the prior afternoon. The big online retailer added to Tuesday's after-hours gains, surging 16.93 to 86.18.
But concerns over subprime mortgage lending and a possible liquidity shortage popped up again.
Existing home sales fell to a 4 1/2-year low in June, the National Association of Realtors said. Elsewhere, private equity firm Cerberus Capital Management has had trouble tapping debt markets for the $12 billion it needs to buy Chrysler.
Meanwhile, the broad market indexes are all holding near multi-year highs. The NYSE composite sits 3% off its peak, the Nasdaq and S&P 500 2% each. The Dow lies 1% below its all-time summit.
But a look at the indexes' advance/decline lines shows some underlying weakness. The Nasdaq's A/D line has trended sharply lower, especially in the past two weeks.
Leading stocks offered mixed tidings Wednesday.
Energy stocks sizzled. The sector has benefited from a wave of recent consolidation, including a huge merger of two leading drillers this week.
September crude jumped $2.32 to $75.88 a barrel after a report showed a big drop in crude supplies another driver for oil stocks' gains.
Playbook July 25th
If one has been in this game for any length of time, you learn to trade with history in your corner. Now, I have pointed this out before, but once again, if over the last 100 years, you invested $10,000 dollars only between the months of May through September, it would have grown to a whopping $12,000 dollars.(Not worth your time!)However, same money invested between the months of October through April, your $10,000 would be worth well over $100,000.
I mention this because when new folks come into trading, they want it to be just like ringing up a winning slot machine every week, every month, despite history, ching, ching, ching, hitting 777s ever week, and at the same time, never be down even $1.(I have a bridge in Brooklyn to sell if anyone is interested give me a call)
Again this game is chess, not checkers. This game is a marathon, not a sprint.
Just like poker, double down when your hot and have a good hand, and lie low when the deck is stacked in the markets favor.
Professional traders are not worried about anything, despite what the news stories read.
Does a surgeon worry about his next appendix surgery, that he has done for the last 20 years? Do you worry about finding your way to work tomorrow, the same place you have driven to thousands of times?
Traders are not worried, they are just trying to get you to worry, so they can make easy money for that extra home in the Hamptons their looking to buy.
Don’t worry about it, things are fine.-Jon
BOOM’s possible BOOM! July 23rd
Boom is 96% owned by institutions. Has a float of 10 million shares with 20% of them shorted by last count, which is probably higher now.
These are the industries they make products for, “The Explosive Metalworking segment offers explosion-welded clad metal plates for use in applications in various industries, including upstream oil and gas, oil refinery, chemical and petrochemical, hydrometallurgy, aluminum production, shipbuilding, power generation, and industrial refrigeration. The AMK Welding segment provides welding services principally to power turbine manufacturers and commercial and military aircraft engine manufacturers.”
These industries are all doing very well. I see a possible earnings short squeeze assuming earnings are good.
They do an average of 215,000 shares a day. With over 2 million shorted, and 96% of the shares locked up by institutions, could take 10 days or more for the shorts to cover.
They will pay any price as panic sets in. I show the value of the shares to be above $60 per share.
—Jon
$100 Oil on the Horizon? By Mark Shenk July 23rd
July 23 (Bloomberg) -- The $100-a-barrel oil that Goldman Sachs
Group Inc. said would prevail by 2009 may be only a few months
away.
Jeffrey Currie, a London-based commodity analyst at the
Worlds biggest securities firm, says $95 crude is likely this year
unless OPEC unexpectedly increases production, and declining
inventories are raising the chances for $100 oil. Jeff Rubin at
CIBC World Markets predicts $100 a barrel as soon as next year.
``We’re only a headline of significance away from $100 oil,
said John Kilduff, an analyst in the New York office of futures
broker Man Financial Inc. ``The unrelenting pressure of increased
demand has left the market a coiled spring. New disruptions of
Nigerian or Iraqi supplies, or any military strike against Iran,
might trigger the rise, Kilduff said in a July 20 interview.
Currie, Goldmans global head of commodities research in
London, is predicting that oil prices will probably touch a record
and stay at unprecedented levels for months or years. The all-time
high for Nymex crude futures is $78.40 a barrel on July 14, 2006.
``Ultimately, the key to the outlook going forward is when
will Saudi Arabia ramp up production, he said in an interview.
``If you have a situation in which inventories globally get drawn
to critically low levels, the volatility in this market is likely
to explode, which significantly increases the probability of $100
oil. Oil might slip to $73.50 if OPEC were to start producing
more now, he said.
``There are questions about whether the oil industry can keep
up with demand,” U.S. Energy Secretary Samuel Bodman said last
week, commenting on the Petroleum Council report.
Rising Costs
The cost of finding and pumping oil is rising steadily,
convincing analysts such as Rubin and Deutsche Bank AG chief energy
economist Adam Sieminski that higher prices will last. Shortages of
deepwater drilling ships and rigs has pushed daily rents to
records, and the skilled workers needed to run rigs, weld pipes,
pilot vessels, fix refineries and build oil-sands projects command
ever-higher wages.
Goldman Sachs’s Currie also notes similarities to a year ago,
with global inventories at about the same level and U.S. government
data showing an increasing bet on higher prices.
``At face value this market is strikingly similar to a year
Ago. Currie said. ``What is different? Supply is down a million
barrels a day, demand is up a million barrels a day. The market is
in a deficit
High Risk Holding CYD in Focus July 23
I thought I would piece together some background for you on shares of CYD, in order to better put into perspective the investment opportunity we have in these shares.
With no analyst covering this stock, other than being a member of Trademechanic, you probably have never heard of China Yuchai.
But that is my job to “pimp around the world” (borrowing term from our buddy Cramer) and bring everyone opportunities such as Navios Maritime NM (another stock we got in 50% ago that had no analyst covering until last week, when 2 penguins jumped on board) before everyone else on TV starts talking about them. Ok, enough set up, lets look at China Yuchai CYD;
The Company
Established in 1951, Yuchai Group became known both in China and abroad as the home of Yulin diesel engines. In 1992, the reform of the joint venture regulations was carried out at Yuchai. Continuous development over the last ten years has allowed Yuchai to grow into a company with a flexible infrastructure and diversified industrial products.
As the largest manufacturer of internal combustion engines and the largest manufacturer and exporter of medium and small engineering machinery, Yuchai Machinery Guangxi(Yuchai Group for short) was formed by a combination of Yuchai Machinery Group Co., Ltd. and Yuchai Machinery Co., Ltd. which includes twenty five holding and joint venture subsidiaries.
Yulin City, Guangxi Province, headquarters of Yuchai Group is noted for its beautiful scenery, a developed market economy and convenient access. Nanning, the capital of Guangxi, is 220 kilometers (136 miles) west of Yulin. Guangzhou, South China's commercial and trading center, is 460 kilometers (285 miles) away to the east. Guilin, world-renowned for its unique natural vistas, is 420 kilometers (260 miles) to the north; and to the south, there are three famous ports in the Yulin vicinity: Zhanjiang, Beihai and Fangcheng.
Yuchai Group, under its new Chairman, Mr. Yan Ping. Further, Mr. Yan Ping is known as a progressive reformer in China’s economic circles and has made enormous progress at Yuchai. He has implemented Sarbanes-Oxley reforms, international corporate governance and accounting practices. He has allowed more transparency into Yuchai’s businesses by leading the above developments and by enhancing the company website (www.yuchai.com ). Under his leadership in 2006, Yuchai Group has been recognized as a top brand in the Chinese 500 Machinery Company rankings. In July 2006, Yuchai moved up 12 slots in this brand ranking from number 37 to number 25. Mr. Yan Ping has also led the way for Yuchai in its environmentally friendly policies in adopting the Euro III and Euro IV standards for Yuchai’s diesel engines.
Since 1989, Yuchai Group has ranked in the Top 500 of industrial companies in China, and was listed as 255th in 2004.
Yuchai's total assets amount to 8.089 billion yuan ($986 million) with net assets of 3.054 billion yuan ($372 million). Yuchai employs 15,000 personnel.
Valuation
Since 2000, Yuchai Group has seen a fast development both in production and operation. In 2004, Yucai's gross profit reached 10.705 billion yuan ($1.31 billion), an increase of 54.14% compared with the same period of the year before, and a total tax payment of 1.068 billion yuan ($130 million), increasing by 7.55% from the year before; and the exported products help Yuchai to earn 11.2 million USD.
The company is small and undiscovered by Wall Street and has no research coverage. With approximately $US2.50 per share in cash and the stakes in Thakral and HLG now worth approximately $US6.0, you are purchasing the largest independent Chinese diesel engine maker for approximately $US2.75. Given this extremely cheap valuation and as I stated in my shareholder activist letter, “I emphatically believe several global buyout firms would be very intrigued in owning a 76.4% interest in Guangxi Yuchai Machinery Co., a subsidiary of Yuchai Group, now a top 25 Industrial and Machinery brand in The People’s Republic of China.” -Peter A Delgado II is the Principal and owner of Threshold Capital Corp
Business Drivers
According to the Company’s most recent annual report, (2005, the 2006 fully audited results are due by June 30, 2007) the general market demand for trucks and buses has contributed to Yuchai’s significant growth since 2001, with the continued expansion of the highways and toll roads in China. The Company expects heavy-duty trucks to become an increasingly important means of freight transportation as road conditions and infrastructure in China improve. (According to the New York Times Magazine on July 4, 2004, “China currently has more than 15,000 highway projects in the works, which will add 162,000 kilometers of road to the country, enough to circle the planet at the equator four times.” More recently, in the New York Times Magazine on July 2, 2006, “The figures behind China’s car boom are stunning. Total miles of highway in the country, at least 23,000 (are) more than double what existed in 2001. China’s first modern expressway, the Guangzhou-Shenzhen Superhighway, was built in the early 1990’s by the Hong Kong tycoon Gordon Y.S. Wu. Wu’s Superhighway was the beginning of an infrastructure binge that seems to be only picking up steam: the government recently announced a target of 53,000 freeway miles by 2035. The U.S. Interstate Highway System, 50 years old, presently comprises about 46,000 miles of roads. Some new roads, especially in the less-developed western parts of the nation, are nearly empty: China is encouraging road construction ahead of industrial development and population settlement, assuming those will follow.”). Both medium-duty and heavy-duty trucks are increasingly fitted with diesel engines because of their higher power, fuel efficiency and reliability as compared to gasoline engines. In addition, the Chinese government had announced as a policy objective in 1994 that motor vehicles weighing five tons or more should principally have diesel engines after the year 2000.
Beijing is still ramping up spending for public works projects for the Olympic Games in 2008 and World’s Fair in 2010.—Jon
Home Makeovers Slow by Marilyn Alva July 22
It's bad enough that the housing market still has a case of the blahs.
Now it seems the once-booming home remodeling industry is down in the dumps too.
After three years of double-digit growth, home improvement spending is now growing only in the low-single-digit range, according to Harvard's Joint Center for Housing Studies.
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Growth in homeowner spending on home improvements will likely remain constant at an annualized rate of around 3% through the first quarter of 2008, says an outlook report issued Thursday from the Joint Center's Remodeling Futures Program.
Negative factors cited include falling sales of existing homes and depressed remodeling contractor sentiment.
"With home prices appreciating so much, it made sense to fix up homes and ride that roller coaster up," said Kermit Baker, director of the Remodeling Futures Program. "There's just less motivation to do this now."
One big reason: Renovation returns have diminished, he says. In 2005 and 2006, homeowners got back an average 90% of their project costs in increased house values. Now the return they get from remodeling is just 75% to 80%, amid reined-in home appreciation rates.
Also, housing experts say, homeowners aren't refinancing their homes as much, now that mortgage rates are up and home prices in many markets are down. When the reverse was true, many homeowners liberated some home equity money to spend on improvements.
"The myth out there is that when housing is down, remodeling is up," said Michael Nagel, chairman of the NAHB Remodelers group.
He says remodeling follows home-building trends, by about a six-month lag and to a smaller degree. What's helping to keep the remodeling market growing at its slow pace is home repairs that can't be put off.
Abolished Short Up Tick Rule by Steven Gabriel July 21st
It may have gone unnoticed by many of us, but on July 6th the “uptick rule” for shorting was abolished by the SEC. This rule was born out of the 1929 stock market crash; it was created to “protect the investing public”-it requires that every short sale can only be executed on a higher price than a previous trade.
The rule was created to prevent short-sellers from adding to the downward momentum of a sharp decline (causing crashes). The rule has been in effect for about 75 years. Now, the rule is gone. But the real issue is, how does it/will it effect us as traders? That is really what we want to know. One study that can help us deduce this is the SEC’s own study. Before dropping the rule, the SEC was doing a private study where they had dropped the uptick rule on multiple stocks (big caps, small caps, etc), and studied what happened. Would it be dangerous to the markets? (I have a hard time believing that you can determine this over a short period of time; the real danger is in market crashes). Nonetheless, they found out some interesting things that may help us.
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Short selling accounts for much more volume than anyone originally realized. It may be that 25% of the NYSE volume is attributable to short sellers. This tells me that short-covering is probably causing more rallies than people had thought (more traders are caught short). And, possibly with the repeal of the rule-more people may begin shorting. This could cause more volatility with more violent vertical moves down, followed by bigger “pops” up. With regards to swing traders; there may be an advantage in placing limits a bit lower and exits a bit higher to take advantage of this.
Small caps stocks had significantly more shorting activity than large cap stocks when the uptick rule was eliminated. I think many of us may have suspected this. The small cap stocks are where people trade-it also tends to be an arena where there are many more new traders, hyperactive traders, and people trying to “knock it out of the park.” This just supports my idea that the most inefficiencies are in this part of the market. Additionally, these stocks may experience significantly more volatility if people can keep shorting all the way down in these stocks; likewise-we should see some significant bounces up when there are short covering rallies in these small cap, low volume stocks. Perhaps, when one of these stocks sells off hard enough (15+% over a day or two) -and there is a gap up-that might be a buy signal because of all of the short covering that will probably fuel the rally that day. I’ll have to look into it.
Although, not based on their research, the repeal of this rule could affect indicators that people have been using for their systems. For instance, ever since this rule was abolished the TICK has averaged about 0, whereas before that the TICK was averaging about 200.
This is still too early to tell, but it makes sense that there is probably an increase in short volume since the rule was taken away. So, if you are trading based on the TICK score (or another related indicator)-your rules may need to be adjusted.
Additionally, this may lead to more effective and testable short systems and executable shorting ideas. One of the biggest (and strongest) arguments against shorting strategies in the markets is that it is very difficult to be able to predict how the uptick rule will effect your results. Backtested results may be completely different than what you would get in actual trading because the backtesting could not take into account the uptick rule. This made these strategies very unreliable. But, now, no problem. Which by itself, could lead to the creation of more short systems, thus causing more short volume. (see above) Wow...
Overall, this could usher in a whole new wave of volatility into the market in a way that we haven’t seen before. It could lead to new opportunities (for those who look), and new pitfalls (for those who don’t). But, most likely it will not affect the markets in a way that we think. After all, many proponents of this rule suspected that shorts were a big cause for the 1929 crash, so what do we blame the 1987 crash on? Certainly, the uptick rule did not do what the SEC felt it was suppose to do (or perhaps it mitigated something that could have been a lot worse). Just like everything else in the market-it’s all new, but really just the same again. So go find those new edges that were just created. I know I’ll be looking for them.
Happy Trading,
Steve
ps--If you were wondering in the study who they found contributed to the majority of shorting...the individuals or the institutions (the smart money). It was the institutions--they accounted for 75% of short activity...WOW!
The Legal ATM Machine at Home July 21st
So often we are used to the stock market being fickle and unwilling to give an inch without a fight, so much so when it pitches softballs right over home plate, we fail to step up and swing for the fence, because it seems so easy.
However there are times when the market is so obviously inefficient it’s the equivalent of having an ATM machine and tomorrows newspaper in your home. What I am talking about is announced buy out take overs.
Lets look at our fist example, shares of AQNT aQuantive
Back in May, Mr. Softie agreed to buy AQNT for $66.50 per share. Now there are three very important things we know about at the point of the announced buy out that are almost 100% guaranteed.
1. AQNT stock price is going to go to $66.50
2. The government has 45 days to nix the deal
3. An approximate time frame the deal is expected to closeIn the stock world, knowing what a stock will trade up to with almost certainty and having a good idea when it will get there, is the same as having an ATM machine at your house with money loaded in it by Wall Street.
True to form, investors didn’t bid the shares up to the take over price, until after the 45 day quiet period expired, giving anyone who went long at $63, an easy 3 point upside.
Now, I know what you are saying, 3 points so what. Hold that thought, lets move on to the next example.
Here we have a chart of shares of AL Alcan
Here Alcoa bids $78 for the shares, which promptly traded to $80. One fast trip to vectorvest.com for your free stock review would have told you a conservative value for the shares is $120 a share.
Alcans board promptly rejected that bid offer which gave us the legal ATM machine opportunity. Again, let’s go back to what do we know.
1. There is a floor in the shares of $80, that offer is on the table
2. The shares are worth much more, confirmed by the fast rejection by the board
3. It’s the job of the CEO and the Board of Directors to make as much money for share holders as possible.
Now, number 3 is the big one. This board would not have rejected this offer, which was a 40% premium to where Wall Street was valuing the shares at the time, unless they already had other bidders they had been contacted by.
Now I have given only 2 examples for the sake of time, but looking at every buy out deal you will general find the same legal ATM machine chances to make money.
If your goal to is to get rich on Wall Street, learn to hit the over the plate, down the middle softballs, to help get you there.--Jon.
Playbook July 20th
Ok, this time of year before purchasing stocks, one always has to be watching how much inventory is already on hand, and what can be exited with a gain.
Right now we are sitting good, able to exit NM, ENG, ACH, GLBL, HOS, BOOM all with gains and could have exited OEH Wednesday with gains.
Now I am going to write a nice piece about adjusting ones expectations for their trades at different times of the years, so I wont go into in detail now, but in short between the months of May through September, we have to expect longer hold times, and fewer trades.
The markets go from Bull to Bear on a dime during these months and you have to be able to quickly exit the vast majority of your trades, with a profit.
When the markets turn, expect 40-60% declines in stocks from their 52wk highs.
The reason I write this tonight is because of GOOG earnings which missed estimates. GOOG is a bell weather stock and could spark a fast sell off.
Now, that doesn’t bother me, because I have purposely waded into the water, not dove in, and waited until we have some breathing room in exisiting shares before taking on more. Also have stayed away from sectors that don’t have an underlying commodity with high demand or global change in the way we live that is backing up the shares.
Having said that, all stocks could take a fast hit, but I believe our particular ones will recover quickly.
Bottom line, I am holding in on Friday, no sale, but am saying, if you feel more comfortable raising the cash, by all means please do. Nothing every wrong with booking the profits, and we give 5 new set ups every single day.—Jon
High Risk in Focus SWKS July 20th
SWKS in Focus, "Skyworks Solutions Shares Jump on Better-Than-Expected 3rd-Quarter Earnings .”
Raymond James analyst Todd Koffman upgraded the stock to "Strong Buy" with a $12 price target, based on his belief that the company will benefit from design wins with mobile phone makers such as Sony Ericsson and Samsung. "Additionally, the company seems to have gained religion on improving its operating model and cost structure. A successful rebound from Motorola and ramp from Apple could be icing on the cake -- the catalyst we have been waiting for," Koffman wrote in a client note. –Jon
Historical Market Data to Remember July 17th
December 1961 (followed by 28% market loss over 6 months)
January 1973 (followed by a 48% collapse over the following 20 months)
August 1987 (followed by a 34% plunge over the following 3 months)
July 1998 (followed abruptly by an 18% loss over the following 3 months)
July 1999 (followed by a 12% loss over the following 3 months)
December 1999 (followed by a 9% loss over the following 2 months)
March 2000 (followed by a 49% collapse in the S&P over the following 30 months)
The defining characteristics of these instances were:
1) price/peak-earnings multiple above 18
2) 4-year high in the S&P 500 index (on a weekly closing basis)
3) S&P 500 8% or more above its 52-week moving average (exponential)
4) rising Treasury and corporate bond yields
Depending on how we define the interest rate trends, we can include two additional historical instances of these conditions: October 1963 and May 1996, both closely followed by 7-10% corrections.
One more instance completes the list: July 2007.-- John P. Hussman, Ph.D.
Where is Oil Going? July 17th
Above we see a chart with the price of oil verses the price of Natural Gas.
You will see this see saw inverse pattern that occurs as one rallies to a high, the other drops to a low, then they meet in the middle, then reverse the pattern. Looking at the chart, it doesnt look like either commodity has reached their respecitve high and low points.
So, not sure where these prices end up, but looks like the have more to go, before reverting to the mean.--Jon
Hot IPO Alert VMware by AMY REEVES July 17th
VMware Inc.
Palo Alto, Calif.
(650) 427-5000
vmware.com
Lead underwriters:
Citi, JPMorgan and Lehman Bros.
Offering price: $23-$25
Expected date: TBA
Ticker: VMW
THE BUZZ
Next to Blackstone, (BX) perhaps, VMware has been the most hotly anticipated IPO this year. The partial spinoff by EMC (EMC) of its virtualization software unit will offer investors a pure play in a booming tech field.
"The key point is that this is a very fast-growing, very dynamic market, and it's still relatively early in the game," said analyst Dan Renouard of Robert W. Baird. "And these guys have a huge lead on everybody else."
Virtualization, for those not up on the latest tech-speak, is a technology that lets one physical server act like multiple electronic servers. It uses the hardware's capacity much more efficiently than the conventional model, so users get more computing power out of the same equipment.
Only about half a million servers worldwide were virtualized as of last year, but industry researcher Gartner expects that to jump to around 4 million by 2009. VMware, as the first mover, owns over 90% of that market.
But that kind of growth has attracted some big-name competitors lately, including industry titan Microsoft. (MSFT) Matt Dyckman, a partner with corporate law firm Thacher Proffitt, says this may have something to do with the IPO's timing.
"Maybe they're thinking that now's the time to spin this off, since the market position's never going to be better," he said.
However, Renouard says the current price range, which the firm set on July 9, seems a little low.
"I think ultimately it will get priced higher," he said. "And there's room for it to trade up even from there."
As a further vote of confidence, Intel (INTC) bought a 2.5% stake in VMware last week. The purchase got a fair amount of ink, but both Renouard and Dyckman say that since Intel already is a leading VMware partner it was not a surprise to those in the industry.
THE COMPANY
VMware was founded in 1998 and shipped its first product the next year. EMC bought it in 2003.
The product range hasn't expanded much — currently, the firm offers 16 products — but the customer base certainly has. VMware says it has sold to over 20,000 organizations worldwide, including every single company in the Fortune 100.
In technical terms, VMware caters to anybody who uses an x86 server. X86 emerged 20 years ago as a cheaper alternative to Unix, and now accounts for 93% of new server shipments.
Despite its popularity, the x86 server presents certain problems. Although the upfront cost of an x86 has been falling, operating costs have been rising.
There's also a lot of unused capacity: Researcher IDC estimates that up to 90% of the average x86's capacity is idle.
VMware believes these problems arise from what it calls the "one application, one server" model. Its flagship software product, the VMware Workstation, lets a user partition his server into multiple virtual servers, each running a different application. The company says the typical user has five virtual servers per physical server, but its system supports as many as 20.
As with many software makers, VMware's offerings range from free entry-level products to high-end versions used by IT professionals.
It also sells a range of automation products that help reduce the complexity of operating its systems, and thereby the potential for error.
RISKS/CHALLENGES
VMware faces the same set of risks that any tech firm faces, especially one catering to a niche market. It must keep improving its technology, it must keep up its customer service, and it must protect its intellectual property.
The Microsoft threat is still somewhat speculative, but it's ever growing. Currently, Mr. Softy offers only some free entry-level products. But it has announced a plan to launch a more complex platform that will compete directly with VMware. Open-source firm
XenSource has also gotten in on the act.
VMware depends on two distributors for around 40% of its sales, and it expects that concentration to continue for the foreseeable future. Any disruption in one of those relationships could hurt business.
EMC is only selling 10% of VMware's stock in the offering, so it will still have dominant control over the company. VMware shareholders will have little say in policy matters.
About 44% of sales come from outside the U.S. This exposes the company to a variety of political, regulatory and foreign-exchange risks.
THE RESULTS
In the first quarter, sales doubled over the prior year to $258.7 million.
Net income increased by the same amount, comprising 15.9% of sales in both quarters.
An increase in research and development expenses was offset by a lower tax rate.
USE OF PROCEEDS
VMware expects net proceeds of $741.4 million from the offering of 33 million shares, or $853.7 million if the underwriters exercise their options. EMC will consume $350 million upfront and an additional $127 million when it sells VMware its new headquarters. The rest VMware will use for general corporate purposes.
THE MANAGEMENT
Diane Greene
President, CEO and director
Co-founded the company and has headed it since its inception. She became a director in April. She has also been an executive vice president of EMC since January 2005.
Carl Eschenbach
Executive vice president of worldwide field operations
Joined in 2002 and attained his current position in 2005. Previously, he held management positions at Inktomi, 3Com, (COMS)
Lucent Technologies and EMC.
Mark Peek
Chief financial officer
Joined in April from Amazon, (AMZN) where he worked for seven years. Before that he spent 19 years at Deloitte & Touche.
Market Re-Cap by JONAH KERI July 17th
A big rally by chip stocks propelled the Nasdaq higher, a day after the index withstood a modest loss in higher volume.
The Nasdaq climbed 0.6%, tops among the major market indexes. The Dow ticked up 0.1%, and the S&P 600 rose 0.2%.
Meanwhile, the S&P 500 finished flat for the day. The NYSE composite edged down 0.2%.
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Volume picked up across the board, especially on the Nasdaq.
The gain in higher volume marked an improvement from Monday's action for the Nasdaq. The technology-laden index slipped 0.4% in slightly higher volume that day, signaling a mild distribution day.
But chip stocks circled the wagons on Tuesday. The Philadelphia semiconductor index vaulted 3%. That marked the index's biggest one-day jump since an identical 3% burst June 21.
The SOX jumped to its highest level since March 2006.
Powerful chip leaders such as Intel (INTC) played a vital role in the Nasdaq's gigantic bull market in the 1990s. But the sector fell on hard times at the start of the millennium, as the technology boom dissolved into the bear market.
Chips rallied off the market's bottom in late 2002 to early 2004, then receded. They've seen up-and-down action since then.
Lately that trend has turned upward again. The Electronics-Semiconductor Manufacturing group has surged into the top 50 among the 197 industries for six-month price performance.
Focus List Stock in Focus DRYS by MIHO NAGANO July 17th
DryShips (DRYS) sails on a rough sea, but with potentially high returns. The Greek dry-bulk carrier is now on a swift downwind run, riding China's explosive growth.
The company's business is simple. Nearly all revenue comes from supplying dry-bulk ships on the spot market. Unlike the time-charter business, which offers discounted rates for customers who lock in vessels for a long time, say six months or five years, spot freight rates are determined purely by supply and demand, like a stock market.
When more customers need vessels for a 30- to 40-day voyage, spot rates rise. When demand falls, rates sink and carriers find themselves in the doldrums.
Since DryShips went public in 2005, the company has survived some difficult times.
"Nobody can control the market," said George Economou, chief executive of the Athens, Greece-based company. Of the company's high exposure to the spot market, "people would say we are taking risks. But I am not taking risks. We think the risks are a lot less than generally perceived by the public or other shipping executives."
Dry-bulk carriers move loads such as grain, iron ore, steel and cement, plus other solid freight.
Rates Up
Recently, the rates for capesize ships, which carry iron ore and coal, shot up 17% to more than $100,000 per day. Rates for panamax ships, the second biggest dry-bulk ships after capesize, rose to more than $55,000 a day.
Compared to peak rates in 2004, rates are up more than 20%. Analysts say they're at all-time highs.
"For the next 12 months, we think the rates should be continuing to rise," said Doug Mavrinac, an analyst at Jefferies.
"Iron ore is the big piece of the puzzle," said analyst Natasha Boyden of Cantor Fitzgerald.
China's demand for iron ore rose 26% year over year because of its rapid industrialization, Boyden says. The steel industry in China imports iron ore, a major ingredient for steel, from Australia and Brazil.
The biggest importer of iron ore, China, and another exporter of the raw material, India, are driving DryShips' growth.
"China's steel production increased 46% (in the last two years), and all that has to do with importing iron ore," Boyden said.
Wary of international concerns over pollution and steel dumping, the Chinese central government has tried to put the brakes on its booming steel producers — for example, by enforcing environmental standards. But Economou says he's not worried about a slowdown.
"The central government doesn't have that much influence on local governments," he said. "The industrialization process is a long process, a 30-year process. I don't think the central government wants to, or can, stop the growth."
Since DryShips went public in February 2005, Economou has focused on three things: aggressively acquiring secondhand vessels, selling older ships and modernizing the fleet. The number of vessels has increased to 37 from six since its IPO.
Now the company owns five capesize ships, 29 panamax ships and one smaller handymax vessel, with two new panamaxes on order.
"(DryShips) was acquiring ships like crazy," Boyden said.
The newer the vessels the company has, the higher the rates it can charge because of the ships'efficiency. The average age of a ship in the fleet is 8.5 years, below the industry average of 12.6 years, Economou said during the first-quarter earnings conference call.
The company can earn higher rates with capesize ships, but DryShips' main workhorse is the smaller panamax vessel. Why?
"Unfortunately, it's hard to secure capesize ships in the secondhand market," Economou said. Also, a panamax can carry different kinds of commodities, such as grains and cements, while the capesize exclusively carries iron ore and coal.
Even though DryShips is the largest U.S.-listed dry-bulk company, it doesn't even rank in the top 10 of the dry-bulk industry.
"The private market is 10 times bigger than the public market in this industry," Mavrinac said.
Besides having spot market exposure, what makes DryShips competitive among 1,000 private firms and China's state-owned giant, the shipping
company Cosco?
Economou says DryShips' management owns 47% of its shares and that helps generate enough cash flow.
"We do not intend to sell shares," he said. This means the company can put a big part of equity back into buying vessels. Economou added: "We can deliver more money for every dollar invested in the company."
"He is able to generate a lot of cash because he has minimum dividend obligations," said Mavrinac.
DryShips has only a handful of employees and outsources operations to a separate company, Cardiff Marine, founded by Economou.
"In the shipping industry, it isn't that unusual, and it could be more efficient," said Mavrinac.
The company says first-quarter earnings rose 68.3% to $1.01 ex items, beating views by 6 cents. Voyage revenue rose 58.2% to $86.7 million.
Being the most spot-oriented company in the industry means it could get hit hard when the demand for ships falls.
During the summer of 2006, when rates declined, DryShips' stock price fell to less than 9 a share, one-fifth of its current price near 54.
Economou says people's reaction to the volatility of the market was harder to deal with than the lower rate itself.
"When the market is low, people tend to panic," he said. "Investors and bankers are less willing to listen to the company." Borrowing money during the period was particularly difficult, he says.
The textbook strategy for a down market is to charter longer term or sell assets. Economou said he expanded the business "using the weak market as an opportunity rather than getting depressed."
Chief Executive
Born in Greece, Economou found that combining maritime business and investing opportunities came natural. Earning a master's degree in naval architecture and marine engineering and a master's in shipping and shipyard management at the Massachusetts Institute of Technology, he saw going public in the U.S. market as the way to grow faster.
The company doesn't give guidance, but Economou said the market was "better in Q2 than Q1."
DryShips is also looking for a chief financial officer from outside the company, but within the industry, he says. Its CFO resigned in May.
Boyden estimates second-quarter earnings of $1.40, higher than Thomson Financial views of $1.32.
"Rates have been stronger than most expect, so I think there will be a positive surprise in Q2," Mavrinac said.
Economou describes the dry-bulk carrier business as somewhat similar to the New York taxi cab business. Nobody can control how many people need cabs or ships on a particular day, but the strategy to win customers is "being very efficient and working 24/7."
Staying Alert July 17th
This is a chart of AAA rated bonds, the best of the best, no sub prime, no junk bonds. So why are they selling off so fast?
Could be some news that us average guys are not aware of yet, could be some large fund being liquidated.
Here is some more bear data to watch for;
MTL, RBN, TS, TX, RS, CEDC, CBG, MBT, RDC, STLD, GIFI, CSX, MW, AYI, AA, CSL, QMAR, ALB, KCI, TDY, HLF, TPX, CNXNobody coming off the list, everyone made the cut.
As always, recommend you go through these to be familiar with them.—Jon
Will Oil go to $100 by SCOTT STODDARD July 15th
Crude oil prices soared to 11-month highs Friday on a new forecast that global oil demand will accelerate next year as supply remains tight.
The pain at the pump may be only beginning, if some of the more dire predictions about future energy prices come to pass.
U.S. crude futures jumped $1.43 to $73.93 a barrel after the International Energy Agency said global oil demand growth in 2008 will be the strongest in years. The IEA did say that higher production and refinery capacity should ease supply concerns somewhat.
A supply shortfall could herald further increases in oil prices, though experts appear divided on how much higher they can go. Some said a spike in prices would derail economic growth, while others said significant price increases can be sustained.
"My line right now is that we're headed to triple-digit oil prices within three or four years and the first digit is not going to be a 1," said Philip Verleger, an economist who heads energy consultancy PK Verleger LLC.
He cited "huge" pent-up demand in China and the rest of Asia, lack of growth in production capacity and reduced investment in refineries amid local resistance to new sites, and worries about measures to fight global warming.
"We've created a situation where prices are going to go up a lot," said Verleger, a respected forecaster.
Others were skeptical of the IEA's estimates and predictions of a big run-up in oil prices.
"I don't think demand is going to grow as fast as they (IEA) think it's going to grow," said Francisco Blanch, head of global commodities research at Merrill Lynch.
"I can see pent-up demand from the emerging markets but I don't think they'll be able to cope with structural upward shifts" in prices of the size seen in the past few years, he added. "If it does happen we'll go into a recession."
So far, spiking oil prices haven't triggered a recession, as some have feared. The U.S. has been sluggish over the past year, but the outlook started to improve in the spring.
Meanwhile, global growth accelerated for five straight years to 5.4% in 2006, the highest in at least 27 years, according to the International Monetary Fund. That's despite oil prices doubling over that time.
Strong global growth is the reason why demand for oil and other commodities has soared in recent years.
"These high prices have had no impact on demand so far," said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA. "It's difficult to make a bearish case (for oil prices) at this time."
Brent crude, seen as a better indicator of the global market, rose $1.17 to $77.57 a barrel, also an 11-month high.
Geopolitical tensions are another factor fueling oil prices, analysts said. They include Iran's nuclear dispute and supply disruptions in Nigeria due to insurgent attacks.
Heavy-handed efforts by Venezuela and Russia to nationalize their oil industries and use crude as a political tool have also raised supply concerns.
Consuming countries have urged the Organization of Oil Exporting Countries to boost output to lower prices. But OPEC has refused, saying supplies are sufficient.
In the near-term, some analysts expect oil and gas prices to decline as the summer driving season ends in the U.S., the world's biggest consumer.
"As we get closer to the end of the driving season, barring hurricane risk, we're likely to see prices fall back below $60 by the end of the year," said Jason Schenker, an economist at Wachovia.
Give us a high 5 July 13
The rally yesterday was nothing more than a result of the “professionals” being flat wrong.
What everyone needs to realize is that a lot of our trader counterparts are too negative, incorrectly short instead of long, and under estimated demand for equities.
If we want to make money in the stock market, its important to turn off the TV and look at the data, look under the hood. I can tell you a lot of Wal Street pros are not making much money because they can’t get on the right side of the trade.
Every time they think we are going lower, and the market goes higher, they are unable to turn and go long because they think the market should go lower.
This has severed me well for a long time, and continues to so. We called the bottom at DOW 12,000, while the “Fast Money” guys were on TV saying sell.
We called Dow 13,000 and just 3 weeks ago, we called Dow 14,000, all based on actual data, not feelings or psychic readings.
My indicators continue to say we are going higher, so we will continue to play the long side. Keep an eye on the indicator stop light.
When its time to go short, we will flip that to red. Congrats to everyone, we appreciate you trading with us, have great weekend.—Jon
Gmarket Koreas Ebay by Marilyn Much July 13th
As South Korea's e-commerce market has grown over the past few years, small business owners have tried to cash in.
Problem is small- and medium-sized businesses often don't have the financial resources or brand power to develop and sustain their own Web sites, says Young Bae Ku, chief executive of South Korea's Gmarket. (GMKT)
So, many of them sell their wares on Gmarket's Web site, gmarket.co.kr, which is a retail e-commerce marketplace. Gmarket owns no inventory. Rather it hosts transactions between other parties. It helps sellers manage, promote and service transactions.
Owners opt to sell on Gmarket because it offers the advanced sales support and systems required for business sellers, says Ku, compared to the "relatively simple" sales functions occasional sellers need. Gmarket's rivals don't provide such sophisticated support, he adds.
Tools
Gmarket's tools help sellers promote their products and enhance sales. Its free Gmarket Sales Manager software helps sellers manage the entire sales process. That entails helping sellers list products, monitor inventory levels and track delivery status.
Gmarket is especially popular with fashion and apparel firms, Ku says. It provides them with the management tools needed to handle sales of online apparel, which is a complicated job due to the various colors, styles and sizes involved.
Another hot category on the site is computers and electronics.
On the advertising front, sellers can buy keywords so their products will appear in search results. They also can buy banner ads to increase the visibility of their products.
Or a seller can buy a premium listing to place its goods on top of the listings page or pages.
In terms of trading platforms, about 75% of transactions are fixed priced. About 10% comes from negotiation and group buying. The rest is from the auction platform.
Both buyers and sellers seem to like what Gmarket has to offer. The company is the No. 1 e-commerce company in South Korea, with about a 20% market share, says Ku.
Gmarket computes its share by dividing its gross merchandise value, or GMV, for a given period by the South Korean e-commerce industry total. GMV is the total value of products sold on Gmarket's site in a given period.
During this year's second quarter, Gmarket's GMV rose 43% from last year to $846.6 million.
Gmarket's biggest rival is eBay's (EBAY) Korean arm, Internet Auction.
Internet Auction was No. 1 in South Korea until late 2005, Ku says.
"We believe we have been expanding our lead over them since that time in terms of transaction volume," he said.
Still, eBay is running a pretty close second, analyst Stephen Ju of RBC Capital Markets says.
"They're probably trading places back and forth depending on the month," he said.
Gmarket is doing well on the financial front. The company went public on June 29, 2006. It has been on fire ever since. For four straight quarters, sales and earnings have grown at least by double-digit rates. In the first quarter, earnings more than tripled to 14 cents a share. Sales grew 74% to $50.9 million.
Registered users, which includes buyers and sellers, grew to about 11.8 million from 11 million at the end of last year's fourth quarter.
During the quarter, the site averaged 16.9 million monthly unique visitors, up from 15.2 million the prior year.
The site gets 17 million unique visitors per quarter, Ju says.
That's a lot, he says, considering the total Internet population in Korea is about 30 million.
What's the draw for buyers?
"Compared to the other players in the industry, they have a better shopping experience for the buyers," Ju said.
Gmarket provides features that lets users interact with its Web site such as extensive product information and feedback from sellers.
The company constantly adds new bells and whistles to enhance the user experience, Ku says. It recently launched a feature called "digital voucher market." Here service providers such as eateries and beauty salons sell their services in the form of digital vouchers users can buy from the Web site.
Another new feature is its "commercial contents market," where users can access fun stuff like video on demand movies, video cooking lessons and online comic books.
Gmarket has benefited from the rapid growth in South Korea's e-commerce market, which has been rising at a rate of between 20% to 25% a year, says Ju.
Last year, online retail sales in South Korea grew 27% to $14.55 billion. In this year's first quarter it grew 22% from the prior year.
"South Korea is a great market for e-commerce due to the high broadband Internet penetration rate, advanced online payment systems and Korean shoppers' eagerness to purchase items online," Ku said.
Korea has about 26.4 broadband subscribers per 100 inhabitants.
Key to the company's success is its focus on small- and medium-sized business sellers rather than individual sellers, says Gmarket's Chief Financial Officer Duckjun Lee.
The small and medium sized business sellers are very "dynamic," he says, and they're concerned about driving ongoing sales.
Transaction Fees
The company gets nearly two-thirds of sales from transaction fees that are charged sellers when they close a sale on its Web site. Its transaction fees are between 6% and 12% of the sales price. It also generates revenue from premium listing fees and advertising.
Watchers expect the company to stay on the fast track. Analysts polled by Thomson Financial expect full-year earnings to rise 76% to 65 cents a share, then increasing another 26% in 2008.
Gmarket's strategy involves expanding outside of South Korea.
"We plan to enter the Japanese market by the end of this year and are keeping a long-term eye on China and the U.S. as well," Ku said.
Gmarket stands to benefit from its relationship with Yahoo, (YHOO) which owns 10.1% of the company.
"We believe that Yahoo can be a valuable long-term strategic partner for developing new services in Korea and expanding our business overseas," Ku said.
Market Re-cap by Jonah Keri July 13th
The major market indexes vaulted to multiyear or record highs Thursday, as merger news and bullish retail sales reports helped drive the rally.
The Dow industrials soared 2.1%, matching their best percentage gain since Oct. 1, 2003. The S&P 500 bounced 1.9%, the NYSE composite 1.8%. The Nasdaq galloped 1.9%.
Volume grew across the board. It climbed 10% on the Nasdaq and 9% on the NYSE compared with Wednesday's levels.
The day's action underscored the health of the market's ongoing rally. On March 21 of this year, the Nasdaq staged a follow-through rally confirmation.
The indexes' uptrend picked up from there. Materials and industrial stocks scored some of the biggest gains, buoyed by rising energy prices and consolidation in the metals sector and other industries. That trend made the Dow the market's leader.
As weeks went by, the market's leadership began to broaden. Top-rated technology names such as
Apple (AAPL) and
Research In Motion, (RIMM) along with an expanding legion of small- and mid-cap stocks, propelled the market higher.
That rally came under scrutiny in June. The major indexes ran into bouts of distribution.
Things have turned for the better again in July. The market's leadership remains healthy. The top-tier stocks are firm, as they were during the June turbulence.
Meanwhile, the Nasdaq has reclaimed the title of market leader. Thursday's rally set new highs for the major NYSE indexes.
Growth stocks have rewarded investors who've followed sound trading rules, buying at the right time, adding shares when warranted, and exercising patience during occasional pullbacks.
Focus List Stock in Focus WRNC
On the set ups from yesterday, shares of WRNC anounced after the bell
that they will be added to the S&P MidCap 400. Now, because of todays large rally, and the fact that we are revert to the mean traders, there are no set ups for Friday. However, with shares of WRNC, one now has an edge and it may be tradable to the upside if any weakness shows itself Friday. Mutual Funds that mimic the S&P 400, will have to accumulate shares of WRNC. So look for this one on a possible Trade Alert given a chance on any pull backs.
Have great weekend!--Jon
High Risk Play in Focus GTI July 11th
Headline,” President Bush Recognizes GrafTech as Leader in Fuel Cell Development and Commercialization”
GTI was added to our High Risk Trading Portfolio on Dec 22nd 2006 at $6.88 per share.
Currently the stock is trading at $16.81 per share, $10 or 144% higher from its entry price into our portfolio.
Its very important to segment your portfolio into Swing Trade, Long Term and High Risk plays. Not one method works all the time.
Motley Fool did a study of stock performance over the last 78 years for the categories of Large Cap Value vs Growth and Small Cap Value vs Growth.
They found that $100 invested in either groups growth category grew to $100,000.00 in 78 years time.
$100 dollars invested in the large cap value category, 78 years grew to $800,000.00 thousand dollars, not bad.
But, $100 invested in small cap value, which is where GTI resides, turned into 7 million dollars in 78 years time.
If one wants to get rich investing, this is a sector you must own and must speculate in. Currently, we are holding ENG, NM, and CYD for our small cap value plays.—Jon
High Risk Play in Focus GTI July 11th
Headline,” President Bush Recognizes GrafTech as Leader in Fuel Cell Development and Commercialization”
GTI was added to our High Risk Trading Portfolio on Dec 22nd 2006 at $6.88 per share.
Currently the stock is trading at $16.81 per share, $10 or 144% higher from its entry price into our portfolio.
Its very important to segment your portfolio into Swing Trade, Long Term and High Risk plays. Not one method works all the time.
Motley Fool did a study of stock performance over the last 78 years for the categories of Large Cap Value vs Growth and Small Cap Value vs Growth.
They found that $100 invested in either groups growth category grew to $100,000.00 in 78 years time.
$100 dollars invested in the large cap value category, 78 years grew to $800,000.00 thousand dollars, not bad.
But, $100 invested in small cap value, which is where GTI resides, turned into 7 million dollars in 78 years time.
If one wants to get rich investing, this is a sector you must own and must speculate in. Currently, we are holding ENG, NM, and CYD for our small cap value plays.—Jon
High Risk Holding NM in Focus July 11
Headline, “Navios Maritime Upgraded by Oppenheimer.”
Good for an additional 5% gain to our bottom line today and help us reach our price target of $13. Thank you Mr. Oppenheimer—Jon
Metals Breakout July 10th
Metals put in a strong tripple top break out from a consolidation pattern lasting the last 3 months.
I have the sector under priced by 25%, thus we will attempt entry tomorrow in shares of BOOM, with an intial price target of $42.
Not yet sure what affect, if any Alcoa earnings will have, but we need to put ourselves in a sector that appears to have confirmed a break out to the next level. Thats what momentum traders do, and we love it!--Jon
Market Review July 8th
The Nasdaq has shown in the last week, it wants to take the lead in moving the markets higher. Lets look under the hood.
You can see the trending pattern makes a new high, then fails, but holds the previous low. This is why momentum trading has been hard to score points with.
Technicians will say this trending will end with a fast move. We can expect a strong vertical move higher finally exhausting this bull run, or if this struggling up trend is distribution, we can expect a big move lower, taking out the prior lows of the up trend.
Look for the Nasdaq to either, never move lower more than 3 days in a row, or break back below the last high, possibly signaling the up trend is done.
The worlds richest man July 8th
Meet the new worlds richest man, Mr. Carlos Slim Helu of Mexico. According to the latest figures, Slim is worth $67.8 billion dollars, compared to Mr Gates $56 billion dollars.
Mr Slims net worth of $68 billion is equal to 8% of Mexicos GDP. I think this shows that Mexico is a place one can invest and reap some good returns.--Jon
Hurricane Season and Oil July 8th
"For the 2007 Atlantic hurricane season, NOAA scientists predict 13 to 17 named storms, with seven to 10 becoming hurricanes, of which three to five could become major hurricanes of Category 3 strength or higher," said retired Navy Vice Adm. Conrad C. Lautenbacher, Ph.D., undersecretary of commerce for oceans and atmosphere and NOAA administrator.
The Atlantic hurricane season runs from June 1 through November 30, with peak activity occurring August through October.
Wonder what happens to the price of oil coming out of an inverted head and shoulders pattern and into a few hurricans?--Jon
Additions and Subtractions July 7
These stocks were added to our list for consideration:
