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Showing posts from April, 2007

So Busy Lately

For those of you who read this blog to find investment ideas and commentary, I would like to apologize for my lack of posting lately.

Have you noticed the underlined stock symbols in my posts lately? I have been working hard to develop the software used to create the pop-up menus you see when you hover over these highlighted stock symbols.

I have extended the capabilities to provide targeted sets of links for technology and general news. I am hoping other bloggers will find my little pop-up menu useful. You can read about it on the OpenLinkz.com website where I explain what it is and how to use it.

As soon as I get OpenLinkz launched properly, I will be accelerating my posting on this site and investigating improvements to the TradeRadar software. Stay tuned!

Weekly Market Update - can new highs continue?

Weekly Market CallAll the averages continued to power upward this week as earnings reports continued to flood the market. There was good news from Amazon, Apple and Microsoft that energized the tech sector. The energy stocks reported decent earnings with oil, ending the week up over $66 a barrel, still off its highs but turning up. We had a late week rally in industrials in spite of poor economic news as big-caps like Cummins reported good earnings.

The government provided their advance read on first quarter GDP on Friday and it was uninspiring at best. Coming in at a weaker than expected 1.3% the bears are standing up and asking how the market can continue to move up with underlying economic strength deteriorating. Indeed, the market's momentum slowed Friday but the DOW and NASDAQ still managed to post small gains.

The questions at this point are: has the market become disconnected from economic reality (and consequently headed for a decline)? Or is the market acting as a lead…

Experience with Ultra funds - QID and QLD

I have written about the ProShares Ultra funds in previous posts. I would like to recount some of my observations on using these funds to capture gains on swings in the market.

My premise has been that with reasonable market timing, an investor should be able to jump in and out of these funds and capture a reasonable portion of profits in both market downswings and upturns.

I chose to experiment initially with the ProShares UltraShort QQQ (QID). The NASDAQ seemed weak back in January and February so I loaded up on QID. Sure enough we got a market break in late February. As the market tanked, QID gained at twice the rate the PowerShares NASDAQ 100 ETF (QQQQ) declined. So far so good.

After the initial break in the market, the NASDAQ took a couple of weeks establishing a bottom and then began rising. I watched as my profit disappeared. I held on because economic readings led me to believe that the market would move lower rather than rise to new highs. I, and many others with a beari…

Weekly Market Update - what slowdown?

Weekly Market Call

Earnings season got into high gear this week and the market was off to the races. With about 25% of companies reporting, most are beating their forecasts. Though earnings surprises for the most part are not dramatic, it is clear that most companies had a solid quarter.

With the markets looking for good news, a good first week of earnings season was the excuse needed to set some new 52-week highs in the major averages.

This leaves me with one question. The macro-economic news thus far in 2007 has been anything but upbeat. This led analysts to forecast lower growth and then revise their forecasts even lower. We were supposed to be entering a slowdown. Then companies report good earnings. What's going on here? What slowdown?

It seems that most analysts and economists either missed the signs of growth or the economic reports themselves were not accurate. I'm looking forward to someone publishing the answer to this riddle.

ETF Comments

Indexes: I have been sayin…

What's up with the Banks?

The market has recovered nicely since the late February sell-off. It took awhile but the financial stocks have finally awakened and joined the party. Or have they?

Let's take a look at two ETFs. First we have XLF, the SPDR Financials ETF, and then KBE, the streetTracks KBW Bank Index ETF.



What's going on with this chart? Why the divergence? The chart above shows over a 4% difference in performance between XLF and KBE.

We have a few themes playing out here: mergers and acquisitions, interest rates and the problems with sub-prime mortgages.

In the case of XLF, we have an ETF that is riding high based largely on the biggest investment bank/broker/dealer stocks. These stocks have been benefiting from the fact that the world is awash in liquidity and interest rates are at a manageable level. It is a perfect environment for leveraged buyouts and every day we hear about a new multi-billion dollar deal. The fees generated by these deals go straight to bottom line of the investmen…

Weekly Market Update - on the brink of earnings season

Weekly Market CallA recurring theme for the last five weeks or so has been the fact that the economic news has ranged from fair to bad and yet the market continues to rise. This week was no different.

Fed meeting minutes were released and confirmed that those who said the Fed remains hawkish on inflation were right. New claims for unemployment jumped for the week ended April 7 to 342,000 from 323,000 the week before. This might reflect a softening in the labor market, but the weekly numbers can be very volatile. The March core PPI was weaker than expected at unchanged, but the total PPI surged 1.0%. The flat core was good news, but also may not reflect a trend. Expectations for first quarter real GDP have dropped to 2%. Interest rate forecasts were raised to reflect the lower probability of Fed easing. Inflation forecasts inched higher. And home price forecasts were lowered.

As the week ends we are on the brink of the first quarter earnings season. Will earnings reflect the somewh…

Weekly Market Update - New quarter off to a good start

Weekly Market CallIn spite of there only being four trading days this week, the market made the most of them, tacking on a good 1.5% and nearly erasing the losses that began in late February.

Major drivers this week included: falling oil prices when Iran released the British hostages, more M&A activity with Kerkorian bidding for Chrysler and a reported .7% increase in February pending home sales.

On the other side of the ledger, the ISM services index number indicated that services were joining manufacturing and housing in this year's slowdown. Indeed, weak factory orders were also reported this week.

On Friday, March payrolls came in with a gain of 180,000, a bigger than expected gain. This will add fuel to the bullish fire as it supports the notion that the consumer will continue to support the economy even if business spending continues to slow. Along with payrolls, it was reported that hourly earnings were up another .3% in March. This coupled with a recently reported decreas…

Looking for a Short Play in Real Estate with ETFs

Back in December, when problems in the real estate market were beginning to hit the news, I wrote a post about the situation and pointed out that if you wanted exposure to real estate in your portfolio, REITs were the place to be and homebuilders were to be avoided.

Since that time, the news from the real estate sector has gotten both worse and more publicized. Having written another post on using inverse sector funds, I find that many searches to the TradeRadar blog are looking for simple ways to use the concept to play the problems in real estate via ETFs.

It would seem that the two places where real estate would have the most impact would be real estate ETFs, obviously, and financial ETFs.

Zeroing in on homebuilders, there is the SPDR Homebuilders ETF (XHB) which, since early February, has been enduring a bumpy ride downward with a few blips up every time some pundit proclaims we have seen the bottom. Is there an inverse ETF that corresponds to this one? Unfortunately no.

Expanding our…

Millicom (MICC) - more growth on the way

Millicom International Cellular S.A. (MICC) provides cell phone service worldwide, especially in developing countries. Headquartered in Luxembourg, Millicom focuses on offering prepaid cell phone services across 15 countries including El Salvador in Central America; Paraguay in South America; Chad, Ghana, and Tanzania in Africa; Sri Lanka in south Asia; and Cambodia and Laos in Southeast Asia. These may not be on the top of your list of vacation spots but they are rapidly growing markets for cell phones. Rather than spending millions to deploy land lines, why not install some towers and sell prepaid cards and cell phones? Millicom has developed a sweet business model.

How good is their business model? How about quarterly revenue growth of 85% year-over-year, gross margin at 72.5% and operating margin at 27.8% and return on equity of 61%? This kind of growth is only available in emerging markets and that is the specialty of Millicom. Whereas cell phone penetration in places like the US …

Tips for TradeRadar Users - in the Zone

I would like to introduce a new concept for TradeRadar users: the Zone.

The area below the green line on TradeRadar charts is "the zone".

Following the normal TradeRadar analysis process, you would use the trailing (rightmost) edge of peaks to identify reversal points. When the red signal peak falls well below the green line, a reversal in trend has been identified.

Example: you are tracking a stock and you get a signal peak indicating BUY. The stock has now entered the BUY zone.
After a peak has occurred, continue to review the path traced by the TradeRadar signal. If it remains below the green line, it can be considered to be confirming and continuing the trend identified by the peak - it is still within the zone.

Example: if a peak indicated a BUY signal and subsequently the path of the red signal line stays below the green line, this stock is still within the "BUY zone" and can be presumed to be continuing an upward
trend.
When the signal comes out of the zone, it def…

Weekly Market Update - first quarter ends on a down note

Weekly Market CallThe first quarter is in the books and it was lackluster at best. The DOW failed to show a gain and the S&P 500 and NASDAQ Composite barely broke even. Many money managers have been talking about buying defensive large cap stocks; nevertheless, the Russell 2000 came through with a 1.7% gain.

As for the past week, the news was mostly bad. Oil prices were up strongly again as Iran and Britain continue their face off. Fed chief Bernanke testified before the Joint Economic Committee of Congress and indicated his major concern is still inflation. Translation: no rate cuts soon. A favorite Fed inflation indicator, the personal consumption expenditure (PCE) price deflator, came in with a bearish 0.3% increase for February.

Housing continues to preoccupy and disturb the markets. New home sales for February were down 3.9% after experiencing a sharp drop in January. Manufacturing is now becoming another source of worry. We had a rotten durable goods report with new orders up …