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Thursday, May 31, 2007

TradeRadar version 1.3 released

A new version of TradeRadar is available. This is kind of a minor release that includes a few usability enhancements. For example:
  • Download button is located right on the main screen now to load data from Yahoo. No need to use File menu.
  • Less clicks are required to get your data and get your chart up and running.
  • Tool tips to remind you how to set Start and End points on the charts.
  • Data loader automatically detects when you are updating weekly and monthly data. When refreshing the weekly or monthly data, TradeRadar automatically strips off the suffix, configures itself for the weekly or monthly data download and tacks the suffix back on when it is finished. This ensures you can distinguish between daily, weekly and monthly data when searching for a stock symbol in the Search drop-down.
  • Help file has been improved and includes several new tips.
As always, a full install is provided as well as a simple upgrade. Get it on the TradeRadar Download page.

Tuesday, May 29, 2007

Merger fever returning to REITs?

The iShares Dow Jones Real Estate Index (IYR) jumped $2.48 today; that’s over a 3% one-day gain. The surge was inspired by the Archstone-Smith deal. The apartment investment firm agreed to be acquired by Tishman Speyer Properties and Lehman Brothers for $22.2 billion. Shares of Archstone-Smith jumped $55.55, to $60.78, in afternoon trading on Tuesday.

Is merger fever returning to the world of REITs?

Twenty-two REIT takeovers were announced last year in deals worth $103 billion, says SNL Financial. That's compared with 11 deals for $29 billion in 2005 and 8 worth $25 billion in 2004. In 2006 half the takeover bids were from other REITs or real estate companies, half from the private equity gang.

As for Archstone-Smith, analysts predicted the price could go higher if another bidder steps in or shareholders hold out for more. With all the liquidity out there, the private equity folks have not been shy about raising their offers.

At $22.2 billion, the deal is large, but it is not unique in the real estate investment trust industry. Many companies have gone private in the last three years, with the most high-profile case being Blackstone's $39 billion purchase of Equity Office Properties Trust in February this year. Many say Sam Zell sold EOP at the peak of the real estate bubble and that Blackstone overpaid. Be that as it may, Blackstone Group has wasted no time selling a big chunk of the portfolio it acquired from Equity Office Properties Trust. The New York private-equity firm has already raised $18.5 billion in asset sales, selling or agreeing to sell properties in New York, Los Angeles and Orange County, Calif.; Portland, Ore.; San Diego; Seattle; and Washington.

What other buyouts have been notable? Crescent Real Estate Equities Co, the Ft. Worth, Texas-based REIT, is being acquired by the real-estate arm of Morgan Stanley for $6.5 billion with debt. This deal however, is not being viewed as the one to light a fire under REITs. Citigroup analyst Jonathan Litt said "The takeout price was consistent with our view that upside in Crescent's shares was limited relative to the execution risk and depressed free cash flow…Crescent has significantly underperformed REITs over the last 10 years, returning 91% versus REITs at 277%."

Another deal involves hotels, not apartments. CNL Hotels & Resorts (CHL) is the second largest hotel REIT in the United States, and owns one of the most distinctive portfolios of luxury and upper-upscale lodging properties. On January 19, 2007, CHL announced execution of a definitive agreement to be acquired by Morgan Stanley Real Estate at a price of $20.50 for approximately $6.6 billion for all the company’s outstanding stock. In connection with this transaction, CHL also announced the sale of 51 hotel properties to Ashford hospitality trust for approximately $2.4 billion, immediately prior to the Morgan Stanley transaction. It is clear the lodging industry will not be left out of the buyout party.

With REIT share prices down lately, there may be a perception that they are as cheap as they are going to get. REITs have been in a multi-year bull market but since late February they have lagged the overall market. On balance, there is still demand for REITs. Blackstone alone, for example, has seven funds dedicated solely to real estate deals.

The buyout focus has mostly been on apartment REITs thus far. Now we have also seen an initial move into the lodging sector. In the search for yield and value, we could see more deals done for REITs of both kinds. At the bottom of the REIT food chain, however, are the shopping mall operators. With a complex cost structure and dependence on consumer spending and economic trends, these kinds of properties are usually less attractive to the buyout artists. When we see the malls being taken private, we will know it’s the end of the party.

Sunday, May 27, 2007

Weekly Market Update - down slightly, what's next?

Weekly Market Call

The week brought a mix of merger activity, reports on jobs, the state of the retail and housing markets, higher oil prices then lower oil prices.

We had Intel announce an agreement with STMicro to combine their flash memory production in a separate company. Coke is acquiring Energy Brands, also known as Glaceau. NASDAQ is buying OMX, the Nordic stock exchange operator. Hologic is buying Cytyc.

Retail earnings this week were not as dismal as in weeks past with some notable bright spots in Target and Aeropostale. There were also some notable disappointments with Saks, Gap, Lowes and Home Depot.

Wednesday we heard from former Fed Chairman Alan Greenspan who noted that he fears a "dramatic contraction" in the Chinese stock market. This is not exactly big news but it did take the wind out the market's sails.

Thursday durable-goods numbers and weekly jobless claims were announced. The number of U.S. workers filing new claims for unemployment last week increased by 15,000 to 311,000. This increase brought five straight weeks of declines to an end; however, the number still came in below analysts' projections for new claims. The Commerce Department reported that orders for durable goods increased by 0.6% in April. These reports provided assurance the economy remains reasonably healthy.

The big surprise of the day came in the form of April new-home sales data. The unexpected 16% jump helped propel the market higher in the early going, but the major averages eventually rolled over and ended the day with a big enough loss that it throws some doubt on the short term direction for stocks.

The next day we got weaker-than-expected existing home sales data that again gave investors the belief that the Federal Reserve could cut interest rates. Home prices (and home values) were noted to have fallen again but its effect on consumer spending remains muted. As a result, the averages recouped some of the previous day's losses but still ended the week lower.

The Dow looks to be taking a breather. The S&P 500 is also slowing down. Though it came close this week, it failed to set a new all-time closing high. Overall, the S&P was down on the week but did not violate its 20-day moving average. Of the major averages, the NASDAQ dropped the most this week and, more ominously, failed to close above its 20-day moving average.

The week after the holiday will be important. There are a number of economic reports forthcoming including Q1 GDP and the Fed's favorite, the core PCE deflator. If the markets move down again, we will likely be seeing a new short-term down trend being established. The markets have moved up effortlessly of late and this past week finally sows some doubt. We will keep our market calls as they were last week.

ETF Comments

Indexes: as discussed above, the major averages fell this week and so did the index ETFs that we track. DIA still looks reasonably healthy and so probably is most prone to at least a reversion back to its 20-day moving average. SPY is already back in that vicinity and its next move is a toss-up. IWM dipped below its 20-day MA last week but gained a bit this week and is hanging in above the 20-day now. QQQQ, already sitting below its 20-day MA has given up the most and so could bounce up again this week. Longer term (over the next month or two), it still looks to me like QQQQ could be in trouble, having dropped below what should have been strong support levels just under $47. And the TradeRadar signal is back in the SELL zone.

Real Estate: the iShares Dow Jones US Real Estate ETF (IYR) managed to gain 2 cents over the previous week's closing price of $81.21. IYR is even deeper in the TradeRadar SELL zone. The SPDR Homebuilders ETF (XHB) moved up over 2% as investors reacted to the better than expected new home sales numbers.

Financials: the SPDR Financial Sector ETF (XLF) fell over 1% this week. XLF may be making a top: it has fallen below its 20-day MA, violated its trend-line and is coming very close to the TradeRadar SELL zone. As for KBE, the bank index, it looks very similar though, unlike XLF, it is still above its trend-line.

TradeRadar Stock Picks

This was a very poor week for the TradeRadar portfolio with most stocks ending up down.

Generex Biotechnology (GNBT) was up a two cents this week on no news to speak of. Chart is still looking horrible and we are down 11.2%.

ProShares UltraShort QQQ (QID) bounced around some more this week but finished up at $48.15. We are down about 0.5% now. Looking out a week or two, QQQQ still looks vulnerable so we continue to hold.

Cisco Systems (CSCO) took a drubbing this week as tech gave up some recent gains. CSCO closed down at $25.52 and our gain swung to a loss 1%

BigBand Networks (BBND) got slammed this week, falling a buck to $17.41 and handing us a fractional loss. There was no negative news and it looks like it suffered as a result of a rotation out of tech. Yet another clue that the NASDAQ is in trouble.

SanDisk (SNDK) also got killed this week, falling to 41.97 after an analyst downgrade. Our modest gain now turns to a loss of 3.3%. The recent up-trend SNDK has been in has been violated and it now sits at the bottom of a horizontal channel. Any move down from here could throw into doubt what has looked like a longer-term reversal from a down trend to an up trend.

Millicom (MICC) really bounced around this week but managed to close at $85.67, down a bit from the previous week. Our gain is still 8.0% at the moment but MICC is starting to look range-bound.

Thursday, May 24, 2007

Interesting action in IYR

We recently pointed out that the iShares Dow Jones US Real Estate ETF (IYR) had dropped out of a trading range and had the potential to fall further. Today we saw some follow-through on that call.

Today IYR ended up down $1.25 at $80.72. This was a 1.5% one-day loss. What was notable, however, was the intra-day price action. After being down as much as 2.7%, in the last half hour of trading IYR jumped up 1.2% from its low on relatively heavy volume. Without that spike, it might have closed below $80.

Tomorrow it will be interesting to see if the IYR bulls can build on the last minute positive action. Today's closing price of $80.72 is just below some recent resistance. We should get a test right away.

By the way, since I made the call that IYR was poised to fall, the ProShares UltraShort Real Estate ETF (SRS) has had its usual wild ride. If, the day after my post on IYR, you had bought SRS at the open (on May 17 at $83.50) you would now have gained a tidy 4.1% over the course of one week. If you sold immediately, I wouldn't blame you; these Ultra ETFs are pesky beasts.

Wednesday, May 23, 2007

Intel and STMicro no threat to SanDisk

With SanDisk (SNDK) one of the recommended TradeRadar stock picks, I wanted to know what impact the recently announced agreement between Intel (INTC) and STMicroelectronics (STM) would have on SanDisk. Here's how it looks:

The agreement whereby Intel and STMicroelectronics will be combining their flash memory business shows how to tough it is to prosper in this industry. It continues the consolidation that began with Micron Technologies buying Lexar and SanDisk buying M-Systems. It also continues Intel's strategy of looking for synergies with partners, an approach that was demonstrated by their teaming up with Micron to push into the NAND flash market.

Currently, Intel and STMicro primarily manufacture NOR flash memory. NOR flash is often used in cell phones but that has started to change. Indeed, NOR flash memory has been largely superseded by NAND flash memory for the hottest consumer applications like MP3 players, digital cameras and PDAs. The fact that NOR usage is declining at a double digit rate is one problem the companies face. In terms of NAND production, they are coming from way behind in a segment that is growing twice as fast as the NOR segment is declining. Another problem is that their manufacturing capabilities are lagging those of other major players. Samsung, for example, produces chips more cheaply and more efficiently using 12-inch wafers. Intel and STMicro are still using 8-inch wafers.

SanDisk, Toshiba and Samsung are among the largest players in the NAND flash segment and they already have the state-of-the-art manufacturing capability to produce 12-inch wafers. This merger between Intel and STMicro's flash memory businesses will have little effect on SanDisk or the industry's other dominant players.

Monday, May 21, 2007

Google and - smart move

Google moves to further dominate the new technology paradigms and leave Microsoft behind.

The platform is the Internet. SAAS, Software as a Service. These are among the newest buzz words in the corporate IT world. The proposed Google - linkup brings together two of the top players in these segments and creates a whole that is greater than the parts.

Google has been making inroads slowly but surely with their Internet-based versions of the classic desktop tools like spreadsheets, calendars, email, instant messaging, word processing, etc. They clearly dominate Internet search and online advertising but also provide powerful facilities for specialized search that can be used on corporate web sites. They are also making their APIs open for developers to build applications around them. They are driving to make what has been a desktop toolset into a web-based toolset. specializes in customer relationship management (CRM) software provided online as a service to their clients. Their applications provide analytics and campaign management in addition to full customer and partner sales and marketing functions. Each client company has its own customized version of the CRM software available for its employees and hosted at data centers. The client companies are essentially outsourcing all the software development and support activities. They are also driving to make what has been a desktop toolset into a web-based toolset.

In all these scenarios, Google and are using the Internet to deliver services to end users. They have essentially assembled the tools necessary to deliver a complete work environment for the corporate or SMB (small or medium-sized business) employee involved in sales, marketing, management or general office work. They are operating system agnostic, they require minimal end-user IT support, they run on less powerful PCs and they are focused on collaboration and communication. Further integration of their respective offerings would make a compelling package.

In stark contrast, Microsoft is barely a player in this space. Despite what they say, Microsoft remains wedded to desktop software, the Windows operating system and closed APIs. Google and are moving to make the chasm between themselves and Microsoft deeper and wider.

In this context, it is no wonder that rumors swirl about Microsoft buying Yahoo.

Sunday, May 20, 2007

Weekly Market Update - a mixed market

Weekly Market Call

The markets moved in a mixed fashion this week with the large caps (the Dow, the S&P) making yet another weekly gain and the small caps (the NASDAQ, the Russell 2000) falling a bit. Once again, the gains were driven by liquidity: merger and acquistion news continues unabated. Examples: Cerberus Capital Management is buying an 80% stake in Chrysler for $7.45 billion, Mylan Labs is buying Merck KGaA's generic drug unit for $6.6 billion, Bausch & Lomb is going private for $4.5 billion and Microsoft is buying aQuantive for $6 billion. Citigroup got a big pop when it was announced that hedge fund manager and Sears Holdings chairman Eddie Lampert had taken a large stake.

On the economic front, the reports were meager and did little to drive the market. CPI came in at expectations excluding food and energy. Food and energy are, of course, where the price increases are but as usual investors shrugged that off as too volatile to matter. New claims for unemployment fell to an unexpectedly low number, leading investors to fear the economy is too strong for the Fed to cut rates.

As for earnings, retail sales mostly continue to disappoint. Guidance from some of the few major corporations reporting this week was not encouraging.

The markets seem focused on the strength of the trend and M&A activity and buyers step in whenever there is weakness. The cracks in the foundation are showing in the small caps where the buyers appear but not as convincingly. I will stay with my negative calls on the NASDAQ and the Russell 2000. It appears the Dow wants to continue its string of new highs and, where I had been uncertain on what the S&P was going to do, it appears it wants to join the party with the Dow. This may be seeing the beginning of classic late-cycle performance where large caps lead and small caps fall behind.

ETF Comments

Indexes: as discussed above, we had good gains for the Dow and S&P this week and so DIA and SPY both rose over 1%. The NASDAQ, as represented by QQQQ, just barely gave up a small fraction of a percent and the Russell 2000, as represented by IWM, fell about 0.7%. IWM is looking truly weak here while QQQQ is stubbornly hanging in though, as mentioned last week, momentum has clearly slowed. It looks very similar to the pattern we saw in February where QQQQ went sideways for a few weeks before tumbling at the end of the month.

Real Estate: as mentioned in a post earlier in the week, the iShares Dow Jones US Real Estate ETF (IYR) fell out of a trading range and proceeded to continue falling, closing the week down over 5.8%. The SPDR Homebuilders ETF (XHB) moved up over 1% as the bottom fishers stepped in again in the absence of another barrage of bad news in housing.

Financials: XLF had a good week, heavily driven by the strength in Citigroup (C) shares this week. No longer faltering, XLF is finally close to a new 52-week high. KBE, the streetTracks KBW Bank index ETF, is also looking much better, having fallen into and bounced out of the TradeRadar SELL zone. Though still lagging XLF in performance since the March low, KBE is now in a firm uptrend.

Energy: the Energy Select Sector SPDR (XLE) was off to the races this week racking up more new 52-week highs. XLE has been going up whether oil goes up or not though, this week, oil did go up and finished the week at $64.95 a barrel. Profits at refiners are now becoming a driving force for XLE. Oil itself, as represented by USO could be ready to rally as we head into the summer driving season and the Gulf hurricane season approaches.

TradeRadar Stock Picks

Generex Biotechnology (GNBT) was up a nickel this week on news of patent being a patent being awarded in Lebanon. Chart is still looking horrible and we are down 12%.

ProShares UltraShort QQQ (QID) is our newest pick. QID bounced around a bit this week but finished up 30 cents at $47.56. We are still down 1.7% from where we initiated the position the previous week. QQQQ still doesn't look especially healthy so I am content to wait this out for a while.

Cisco Systems: again no news on CSCO but they had a poor week, closing down at $26.21 and reducing our gain to only 1.6%

BigBand Networks (BBND) recovered somewhat after the previous week's drubbing. BBND finished at $18.42 to get us back up to a 5.6% gain.

SanDisk (SNDK) seems stuck in a bit of a trading range or channel but trending ever so slowly upward. This week it closed at $44.14, toward the lower end of the channel, reducing our gain to 1.8%

Millicom (MICC) had a strong week, closing at $85.84 and bringing our gain to 8.2%

Saturday, May 19, 2007

TradeRadar Software Update to Version 1.2

A new version of the TradeRadar software is now available on the Download page.

New Features:
  • Top chart zooms in to display price action; no empty space below higher priced stocks. Prices will no longer be squeezed into the uppermost portion of the chart. You'll be able to clearly see price patterns and relate them to the TradeRadar signal in the lower chart.
  • The SELL zone marker has been adjusted a bit higher to give quicker SELL signals.
  • The dashboard indicator for Kurtosis takes the time period into account. When there are less than 12 months being analyzed, a good Kurtosis reading will be indicated more accurately.
  • A small bug when choosing the last data element in a time period has been corrected.
  • When importing data, hitting the Enter key has the same effect as clicking the OK button.
TradeRadarWeb has also been updated. All the enhancements listed above have also been implemented in the online version of TradeRadar. Try it out.

As always, both a full install and an upgrade are available. The upgrade downloads quicker and only updates the TradeRadar program. Your database is left untouched. Get the new version now at the Download page.

Wednesday, May 16, 2007

Watching NASDAQ with interest

Having made the determination that the NASDAQ was heading for a fall, I watched today's action in the Powershares QQQ Trust ETF (QQQQ) with interest. Initially, QQQQ was somewhat weak but then we got a good bounce up. Checking the charts, however, I see that we have a lower low and a lower high.

Much of today's action was the result of billionaires buying Dow companies (Bausch & Lomb) or buying stakes in Dow companies (Citi, Union Pacific, Norfolk Southern). I can see that kind of activity pushing up the Dow but it doesn't especially do much for NASDAQ listed companies.

To me, it still looks like the Q is making a top.

Look out below - iShares REIT ETF drops today

The iShares Dow US Real Estate ETF (IYR) just fell out of a trading range today. Looking at the chart below, you can also see it happened on a pickup in volume.

I have written previous posts on how the problems in subprime mortgages were not really affecting the commercial side of the real estate market and, indeed, real estate investment trusts have held their value much better than the home builders. Unfortunately, the continued dismal news from the housing sector lately must finally be taking its toll on the REIT sector, too. With the value of real estate falling in some markets, perhaps rental properties and condos are not the attractive investments many REITs originally thought they were. With reports of retail sales down, building or owning malls may not be as lucrative as it once was either.

I have mentioned before that there is an inverse ETF that more or less tracks IYR. It is the ProShares UltraShort Real Estate fund (SRS). You may want to check it out. IYR will probably find support around $82. If it breaks below that level, it could be a long way down.

Monday, May 14, 2007

Why I think the NASDAQ is in trouble

I wanted to write a small post to describe what steps I took that led me to believe it was time to bail out of QLD, the ProShares Ultra QQQ ETF, and jump into QID, the ProShares UltraShort QQQ ETF.

First, general intuition came into play. I was not alone in feeling that the markets were over-bought. There was plenty of discussion on this topic in the financial press and on financial web sites and blogs. The economic news continues to be somewhat downbeat so the current healthy earnings season and rising stock prices came as somewhat of a surprise. This lack of correlation between the economy and stock prices sounded a cautionary note.

Checking the site, which is one of the tools provided on the TradeRadar blog, my overbought assumption seemed to be reinforced. The site showed QQQQ, for example, to be at the top of their proprietary RallyBand and the reversion to the filtered trend or down to the bottom of the RallyBand seemed to be the most likely next move. Indeed, the site indicated that the short trade had the most potential for success. The chart is below:

I also checked the site. Their candlestick analysis rated the QQQQ a Hold. Interestingly, they noted that they had put out a Buy signal 38 days ago. Since then, QQQQ had gained well over 5%. Based on that alone, I thought it was about time for a short-term pullback.

I also checked the TradeRadar BUY/SELL signal. I set the starting point at March 2, the bottom of the recent pulback that began in late February. I set the filtering to 2 days and looked for a SELL signal. Sure enough, the peak was there. The trailing edge did not quite dip down into the SELL zone but the strength of the signal, combined with the factors mentioned above, were enough to move me to be bearish on QQQQ. Here is how the signal looked:

I don't presume to know whether this will be a short-term pullback or a longer term slide; nevertheless, I felt it was necessary to get out of QLD. These ProShares Ultra funds are great when the market is going in the desired direction but when it turns against you, it is difficult to watch these funds dive twice as fast as the associated index. I have decided that if I am going to hold these funds, I will take a short-term approach.

Yahoo management makes the right moves

Yahoo (YHOO) could be a buy now. Many analysts disagree but I think there are reasons to expect better days ahead for the Internet giant.

Remember the "Peanut Butter Manifesto"? Back in November, a staffer at Yahoo wrote a blistering missive criticizing the scattershot strategy in place at that time.

Since then Yahoo has released Panama, their update to their advertising engine.

They've released earnings that disappointed the Street (an 11% drop in profits in Q1) and seen their share price drop accordingly.

They've been at the center of rumors about being in talks to be bought out by Microsoft and seen their share price spike up though most analysts think there is little chance of this actually happening.

Now they are announcing the closing of marginal business segments. The latest victims are their photo-sharing site and auction site.

The photo site is being replaced by Flickr, an astute purchase by Yahoo back in 2005 that has since become ubiquitous on the web.

Yahoo has always sent a great deal of traffic to eBay. Now that Yahoo has become eBay's exclusive provider of graphical ads, as well as sponsored search advertisements, it makes sense to concede the auction space to eBay and look for revenues from the advertising model which Yahoo understands and excels at.

These last two actions are indications that Yahoo management is serious about focusing on core capabilities with the highest revenue potential. This change from being all things to all people will eventually benefit the bottom line.

Little noticed by the financial media is an effort to make Yahoo "open source". They are making an effort to enlist the huge population of web software developers to create compelling content based on Yahoo data services and code libraries and offer it (most likely for free) to any and all users. This is not completely altruistic. It will have the effect of putting Yahoo at the center of a variety of applications. If any of them go viral, Yahoo will certainly benefit.

With the stock around $30, Yahoo is probably a couple of points higher than it deserves to be based on the fundamentals. But with a new focused strategy in place, I would advise buying on weakness.

Saturday, May 12, 2007

Weekly Market Update - Momentum Slows

Weekly Market Call

This week the markets appeared to take a breather. It's been a while since we didn't post a sizable weekly gain in every major index. Indeed, the NASDAQ and the Russell 2000 finished slightly lower and the other averages barely managed fractional percentage gains.

Wednesday, the Fed held rates steady, as expected, and their policy statement pretty much had nothing new to say.

Thursday saw a big sell-off, mostly due to poor same-store sales reports from a group of major retailers. This threw confidence in consumer spending into doubt and most averages lost about 1.4% on the day. Adding to the negative tone, a larger than expected trade deficit was reported, driven in large part by rising oil prices.

Friday saw a bounce (as most analysts expected) when the Labor Dept. announced that producer prices eased in April. The core rate was unchanged again, pushing the year over year rate to 1.5% and giving investors hope that inflation will be trending lower. This was, of course, exluding food and energy. Apparently, investors don't eat or buy gas. Monthly retail sales were also announced and, instead of the previous day's pessimistic interpretation, the decline of .2% was looked as a sign of a moderating economy that might encourage the Fed to ease rates sooner rather than later. What a difference a day makes.

In general, the charts of the major averages show a clear slowdown in momentum. As earnings season winds down, investors will be more and more influenced by economic news. This could be the beginning of the slow summer season.

ETF Comments

Indexes: a lackluster week for index ETFs with DIA barely scratching out a gain and QQQQ down slightly. (More about QQQQ when we get to the TradeRadar Stock Picks.) Small caps continue to look weak with IWM, the iShares:Russell 2000 Index ETF, down fractionally and starting to slip into the short-term TradeRadar SELL zone. SPY managed to deliver a small weekly gain by the end of trading on Friday but has dipped below a trendline. Next week will be critical for the averages to see if the market weakens further or shrugs off Thursday's sell-off and resumes its upward march. The week will find DIA looking the strongest and IWM the weakest with the others in between.

Real Estate: REITs gained a little and home builders had a tough week. In spite of the gain, the iShares Dow Jones US Real Estate ETF (IYR) continues to essentially go sideways and remains deep in the TradeRadar SELL zone. The SPDR Homebuilders ETF (XHB) dropped again due to more reports confirming the dismal housing outlook. The trend appears to be down again. It appears the bargain hunters have given up for the time being.

Financials: XLF managed to gain a few cents this week but Thursday's selloff hit the ETF hard. On the long term chart, XLF is clearly well out of the TradeRadar SELL zone. Measuring from the bottom in April to now, though, it is looking like it's ready to drop back into the SELL zone. KBE, the streetTracks KBW Bank index ETF remains mired in bear territory and the fact that it managed to close at $58.56 the previous week did not signal an uptrend. The ETF finished this week down a few cents and looks like it might be rolling over. Needless to say, KBE remains deep in the TradeRadar SELL zone.

Energy: The divergence in two ETFs, XLE and USO, that I pointed out last week is easing somewhat. XLE, the Energy Select Sector SPDR (XLE), made another new closing high. United States Oil (USO), a proxy for oil prices, did advance this week adding about 1%. Over the past three months, however, XLE has gained 12% while USO has fallen 3%. I still don't get it...

TradeRadar Stock Picks

Generex Biotechnology (GNBT) had a terrible week and yet we have continued to hold. This week it dropped further to close at $1.43 for a total 15.4% loss. There has been absolutely no news I can find to account for the weakness and with the breast cancer trials going on in China, I had expected the stock to get a little boost.

The NASDAQ 100 was up slightly this past week but Thursday's meltdown was all I needed to act on my feeling the average was overbought. My experience with the ProShares UltraShort QQQ led me to believe that these Ultra ETFs are more speculative, best held for short periods of time and traded more actively than a stock or normal ETF. So I chose to act and sold the Ultra QQQ (QLD) and purchased the UltraShort QQQ (QID). Over the course of barely three weeks holding QLD we managed a gain of 2.7%. Friday's bounce, however, erased our small gain in QID. We will be looking to next week to confirm our feeling that a short-term decline is in store for the Q.

Cisco Systems (CSCO) reported this week and the news was actually pretty good, featuring a 34% increase in earnings. Unfortunately, the guidance was not sufficiently positive and the stock was punished. CSCO finished this week at $26.63, reducing our gain to 3.3%. See my post explaining why I think the selloff was overdone.

BigBand Networks (BBND) had an awful week dropping from $18.85 to $17.47. Our gain has been reduced to a miserable two cents a share or about 0.1%. As I have said before, the company has good prospects and it's worth holding through what could be a rocky period.

SanDisk (SNDK) continues a modest recovery after the drop that followed its earnings announcement a couple of weeks ago. At $44.87, we are hanging in with a 3.4% gain. There have been several interesting announcements this week of SNDK hooking up with other companies, Microsoft for example, with whom they will be using flash for portable computing environments. Stay tuned, this is a pretty cool idea.

Millicom (MICC) also had a lousy week, primarily do to weakness during Thursday's selloff. MICC finished the week at $82.97, more that a dollar below last week's close. We maintain a 4.6% gain.

Thursday, May 10, 2007

Flipped from Bull to Bear today

Like many other investors, I have been enjoying the recent run-up in equity markets but have worried that it has been a bit overdone. It seems that every piece of news, good or bad, resulted in the market advancing. This is something that can't go on forever.

This afternoon, with QQQQ down about 1%, I pulled the trigger and sold the ProShares Ultra QQQ ETF (QLD) and bought the ProShares UltraShort QQQ (QID) again.

QLD was sold at $90.28 for a 2.7% gain over the course of under three weeks.

QID was bought at $48.39 and ended the day at $48.53 for a 0.4% gain.

If the mood of the market is going to change now that the enthusiasm of earnings season is over, bad news will be interpreted as bad news, not ignored. For a list of all the things wrong with the market these days, check out this post by Doug Kass.

Wednesday, May 9, 2007

Cisco - Earnings Commentary

Cisco reported after the close yesterday. Though earnings were up 34%, guidance was not to Wall Street's liking.

Did Cisco guide downward for the next quarter? No, not really. They reduced the lower limit of expected revenue.

Did they say growth would be poor across the board? No, they said large corporate customers in the US were showing sluggish demand and that growth in that segment would be reduced from 20% to mid-single digits. That sounds bad until you realize that's only about 13% of Cisco's business.

Sales to large enterprise customers in international markets is still expected to grow strongly and in consumer markets, growth has been in double digits and is expected to continue at that rate. Cisco now gets more than half of it's sales outside the US and thus is less dependent on the domestic market.

So should we rush to sell Cisco shares after today's gap down? They were down 6.5% today and will probably weaken further over the course of the next week or two. Nevertheless, this downturn has been overdone. The share price will recover. As I said in the post where I first recommended Cisco, the wind is at their backs. They are in a fundamentally good position with good growth expected in most of the markets they serve. They will remain a solid part of our portfolio.

Sunday, May 6, 2007

Weekly Market Update - bulls prevail (again)

Weekly Market Call

In general, company news and economic news were all pretty positive this week. Plenty more earnings were announced and it now appears as if earnings growth for the first quarter will come in around 8.5%, a revision upward.

On the economic front, we had a flat reading on core personal consumption expenditures for March. This is one of the Fed's favorite measures of inflation. The year-over-year increase dropped to 2.1% which, for a change, is within the Fed's 2007 forecast of 2% to 2.25%. We also had better than expected readings on the ISM surveys for both manufacturing and services and an uptick in March factory orders. More important was the 88,000 increase in April nonfarm payrolls that gives a more direct indication that growth continues and the consumer is safe to keep spending.

Merger activity did its part to keep the markets happy. We had news of Microsoft making a play for Google, News Corp. offering a huge premium for Dow Jones and Cablevision looking to go private.

All in all, it appears things are shaping up to give us the "Goldilocks economy" with inflation not too hot and growth not too cold.

ETF Comments

Indexes: another good week for index ETFs with DIA up over 2% and QQQQ up 1.8%. Small caps continue the recent trend of looking a little tired. IWM, the iShares:Russell 2000 Index ETF was up only 0.5%. SPY managed to do OK, gaining 1.4%

Real Estate: REITs and home builders faltered this week. The iShares Dow Jones US Real Estate ETF (IYR) has basically gone sideways for the last month and this week did nothing to change it. This ETF is basically a proxy for the REIT market. IYR remains deep in the TradeRadar SELL zone. The SPDR Homebuilders ETF (XHB) ran into headwinds this week when a drop of 4.9% in March home sales was announced on Monday. I would not be a buyer here. With XHB failing to convincingly move about its 20 and 50-day moving averages it looks as if the recent rally has run out of steam.

Financials: XLF continued marching upward slowly but steadily this week though they are still a bit below their previous high. XLF is clearly well out of the TradeRadar SELL zone. KBE, the streetTracks KBW Bank index ETF remains mired in bear territory but there is hope on the horizon. It has made multiple runs at a resistance level just under $58.50 without being able to break through until Friday this week when it closed at $58.56. KBE remains deep in the TradeRadar SELL zone but perhaps we are beginning to see a glimmer of a rally beginning.

Energy: I haven't had much to say about oil or energy lately but today I am moved to point out the divergence in two ETFs. First we have the Energy Select Sector SPDR (XLE) which hit another new high this week. Contrast that with United States Oil (USO), a proxy for oil prices, that according to TradeRadar peaked about a month ago. Indeed, oil prices dropped to $62 a barrel this week from $66 the previous week. Why have XLE and USO been so uncorrelated for the last month? Is this another indication the market is getting ahead the fundamentals or is this just reflective of expected higher oil prices in the summer driving season?

TradeRadar Stock Picks

Generex Biotechnology (GNBT) has continued it downward trajectory on absolutely no negative news. It closed this week at $1.54, down eight cents from last weeks $1.62. We now have an 8.9% loss.

Still no particular news on Cisco Systems (CSCO) this week but it keeps moving higher. They finished this week at $27.91, yielding us a gain of 8.2%.

BigBand Networks (BBND) announced its first earnings as a public company this week. Expectations were high and BigBand merely met instead of exceeding. As a result, BBND got a haircut, falling from a high of $21.43 to close the week at $18.85. Oh well, we still have an 8% gain thus far and the company's prospects remain good.

SanDisk (SNDK) showed some resilience the last couple of days of the week. Having delivered its poor earnings report the previous week we are glad to see the stock stabilize. All in all, it is hanging on within its trading range of the last six weeks. At $44.15, we can still take comfort in a 1.8% gain.

Millicom (MICC) spent the week digging out from a more than 3-point loss on Monday. MICC finished the week at $84.66, a few cents above last week's close. We stand at a 6.8% gain.

Finally, we have the ProShares Ultra QQQ ETF (QLD) which managed a bit of a gain this week. I am a little disappointed here. The NASDAQ was up 1.8% on the week but QLD was up only 2.3%. This ETF is supposed to double the performance of the NASDAQ so we should have a seen a gain over 3%. Still, I suppose one shouldn't look a gift horse in the mouth. QLD finished the week at $92.07 yielding a total gain since we initiated the position of 4.7%

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