Tuesday, June 26, 2007

Bearish on Zilog

Today MarketWatch wrote that Zilog Inc. (ZILG) cut its fiscal first-quarter sales outlook, saying it would be 11% to 13% lower than the fourth quarter's $19.1 million. Based on fiscal fourth-quarter results, the San Jose semiconductor company is expecting fiscal first-quarter sales in the range of $16.6 million to $17 million. The company also said it still expects to post a quarterly loss of 16 cents to 18 cents a share.

This will make it six quarters in a row that Zilog has lost money. And yet, as of earlier this month, it had tripled in value since its low point of about $2 back in March of 2006.

Founded in 1974, Zilog is a supplier of 8-bit microcontrollers. A microcontroller is a computer-on-a-chip that is optimized to control electronic devices such as motors, remote controllers and user interfaces on appliances and various other gadgets. Microcontrollers are essentially a small PC on a chip and typically include a central processing unit, different kinds of memory and various peripheral capabilities such as network connections, timers, Analog-to-DigitalConverters (ADCs) and Digital-to-Analog Converters (DACs). These products enable a range of consumer and industrial electronics manufacturers to control the functions and performance of their products. Zilog has been a pioneer in this space, creating the original Z80 core processing unit many years ago. Its MCUs are certainly the workhorses underlying many products we interact with every day from TV remote controls to Palm Pilots.

Zilog's products are ubiquitous and necessary but they operate at the lower end of the technology spectrum. Compare the 8-bit MCU with today's 64-bit multi-core processors from Intel and AMD and you can see that Zilog has become a niche player, relegated to less complex uses. This is an area where margins are thin and volume is paramount. They are like the Wal-mart of the microprocessor sector.

There is some hope on the horizon, however. Zilog has been moving into the 32-bit MCU segment known as ARM-9 and is pursuing an application specific product strategy that will allow the company to target markets that are higher up the food chain in terms of profit margin and unit volume potential. And in February of this year Zilog named Darin Billerbeck as their new President and CEO. Billerbeck is a 14-year Intel veteran and was formerly Intel's Vice President and GM of their Flash Product Group. This was looked on as a positive development for the company and Zilog's stock price began rising.

Nevertheless, with a PEG ratio over 9 and a chart that is breaking down, there is no surprise Zilog is also flashing a strong TradeRadar SELL signal (see below).

Zilog chart - SELL signal

With the stock dropping to $5.34 today and no support in sight until the $4.50 level, look for ZILG to pull back at least another 18%. Will it be cheap enough to be a buy at that point? I don't think so. The expected loss for the upcoming quarter will only be marginally less than the previous quarter's $0.21 loss. We need to see Zilog get a lot closer to profitability before we would step in as buyers. The opportunity over the next few quarters appears to be on the short side.



Monday, June 25, 2007

Training Video for SELL Signal Available

I would like to announce that there is another training video available. This one shows how you would go about generating a TradeRadar SELL signal.

Like our first training video for the BUY signal (click here to view that video now), this one is a WMV file that will play in Windows Media Player. Viewing both videos should prepare you to use the TradeRadar software and add a new tool to your technical stock analysis toolbox.

View the SELL signal training video now!



Sunday, June 24, 2007

TradeRadar Training Video Available

I am pleased to announce that the first TradeRadar training video is available. Many of you have asked for guidance on how to use the TradeRadar software. I will admit, it is not intuitively obvious how it works.

This first video shows how to go about generating a BUY signal. SanDisk, an example from our model portfolio, is used.

The video is about three minutes long so, with a size of 4MB, it may take a minute or two to download. The video should be viewed in Windows Media Player, a version of which should be installed on all Windows-based PCs. I tried to find a balance between picture quality and file size. In any case, it is fairly easy to see what the training is trying to demonstrate. It will show all the steps needed to look for and assess a TradeRadar BUY signal.

View the video now!



Weekly Market Update - no follow through

Weekly Market Call

After the markets finished the previous week on a very strong note, I expected to see some follow through that would lift the averages to new highs. Instead, the markets spent the first two days of the week meandering and then began their slide downward. By the time trading was done on Friday, the Dow and S&P 500 had lost 2%, the Russell 2000 had lost 1.6% and the NASDAQ had lost 1.4%.

The major catalyst this week was Bear Stearns and the problems with two of their hedge funds that had placed bad bets on sub-prime mortgages. Investors in the funds were about to auction off assets when Bear came through with a $3.2B loan to keep the funds afloat. The mood that swept the market was based on the fear that other funds holding heaps of securitized sub-prime debt might have to re-price their holdings as well. And that could lead to more fund failures or near-failures. Suddenly, it doesn't look like the sub-prime mess is so well-contained after all.

Another important market driver lately has been interest rates. The same story played out here, with the bond market trading higher earlier in the week and weakening as the week progressed. With stocks looking so weak, some money flowed into bonds and managed to bring the yield on the 10-year note down to 5.13% by week's end.

We saw the successful IPO of the Blackstone hedge fund this week but it wasn't enough to light a fire under the market.

A number of well-known companies reported earnings and the market got the overall impression that the consumer is not spending as freely as in the past. Some of the companies that disappointed included Best Buy, Circuit City, Fed Ex and Starbucks. The pundits say the housing crisis is contained and inflation is benign. If that were true, why is the consumer stumbling? Is it because of falling home prices, rising interest rates and ever higher energy costs?

ETF Comments

Indexes: as discussed above all the indexes fell this week and so did the corresponding ETFS. In terms of how they look when analyzed using the TradeRadar software and daily data, it appears DIA is still above the SELL zone but SPY is right on the borderline with all the SELL indicators flashing green. IWM is almost is the same situation as SPY but has a little more safety margin. QQQQ, surprisingly, is holding up quite well. Looking at the same charts using weekly data, it looks like consolidation is taking place but nothing alarming. Are we seeing, then, a short-term pullback? The onset of the summer doldrums? Or will it develop into something more serious?

Real Estate: REITs moved downward relentlessly this week. The iShares US Real Estate ETF (IYR) was no exception and their down-trend remains intact. IYR continues to be buried in the SELL zone. Any rallies should be used to load up on the ProShares Inverse Real Estate fund (SRS) which has been making new highs since I mentioned it in a previous post back in mid-May. At that time I pointed out that IYR had fallen out of a trading range. Homebuilders were in the same boat this week. It appears the value play that was driving XHB up has lost momentum. XHB as resumed its clear downtrend as confirmed by the 20-day moving average dropping below the 50-day moving average.

Financials: the SPDR Financial Sector ETF (XLF) had a bad week and now sits below both its 20-day and 50-day moving averages. The TradeRadar SELL signal is now flashing on the daily chart and almost flashing on the weekly chart. It could be that the broker/dealers can no longer keep this ETF afloat while other financial companies in the fund are breaking down. The streetTracks KBW Bank Index (KBE) has been deep in the SELL zone since March and this week only served to worsen the situation. It is clear that the interest rate picture and housing are hurting the regional banks. Short this ETF if you can.

Energy: having brought the PowerShares DB Energy ETF (DBE) to readers attention last week I thought I'd check on how it did since then. Well, it lost a few cents over the course of the week but remains in a clear uptrend. Things were pretty much the same for the Energy Select SPDR XLE. This looks like one sector of the market that is holding up quite well. I would take advantage of this minor pullback to buy either of these ETFs.

TradeRadar Stock Picks

To view this week's updates on the portfolio of TradeRadar Stock Picks, please visit the Track Profit & Loss page at trade-radar.com



Thursday, June 21, 2007

Is it a Rally without the Financials?

Major averages ended Thursday with decent gains. Looking under the covers, however, we see a market struggling to move higher.

The Conference Board's index of leading indicators rose more than expected and the Philadelphia Fed's index of regional manufacturing jumped 14 points to a strong 18.0 and bonds sold off a bit, raising the yield on the 10-year note to 5.15%. This may not have had much effect on the overall market but it did seem to impact the interest rate sensitive sectors of the market.

The financials sold off strongly first thing in the morning. The Financial Select Sector SPDR (XLF) and the KBW Bank ETF (KBE) managed to just get back above the flat line by the end of the day. REITs, as represented by the iShares Dow US Real Estate ETF (IYR), sold off even more strongly and, despite a valiant effort, still ended the day on a down note.

Contrast that behavior with the action in technology stocks. The Technology Select Sector SPDR (XLF) and the Powershares QQQ Trust (QQQQ), for example, started the day calmly and moved up steadily for the remainder of the trading session. Techs led the market today and turned in strong results.

At this point, XLK and QQQQ exhibit charts that show some consolidation while XLF and especially KBE and IYR are showing signs of complete breakdown.

Given that the financials comprise one of the largest segments of the overall market, I am beginning to worry that we are running out of steam. Can the markets continue to rally based on energy and tech alone?



Tuesday, June 19, 2007

Yahoo and Google- get it over with!

I have written once before on how Yahoo was making some good moves in terms of phasing out unprofitable lines of business and increasing focus on core business functions.

Yesterday it was announced that Yahoo CEO Terry Semel had resigned and would be replaced with Yahoo founder Jerry Yang. Investors initially cheered this news but then concluded that Jerry Yang did not represent enough of a change. The stock ended today down 1.7%.

The bloggers and analysts are now speculating on potential directions for Yahoo. Mergers with or acquisitions by Time Warner, Microsoft and the other usual suspects have been mentioned.

My opinion is that Google should spend some of their billions and acquire Yahoo. The two companies are completely complementary. Google offers the dominant search and online advertising platforms on the web. Who needs Yahoo's Panama when you can sign up with Google?

Google realizes they need to augment their presence with more content; hence, the purchase of YouTube. Yahoo has tons of content. They are the most visited site on the web. Their financial, email, news, shopping, Flickr photosharing site and other features are far more popular than similar features offered by Google.

Why should these two companies compete head to head when a combination would create an Internet powerhouse? Come on, Google! Buy Yahoo and get it over with.



Sunday, June 17, 2007

Weekly Market Update - Inflation OK, Markets Pop

Weekly Market Call

This past week was filled with economic data that turned out to be mostly positive. Whereas the previous week saw a significant rise in interest rates and a corresponding drop in the market averages, this week saw reports of minimal inflation that caused rates to ease a bit. Nevertheless, it's been a wild week or two in the bond market. On Friday, the yield on the 10-year Treasury note fell to 5.15% from 5.22% on Thursday and a high of 5.31% reached on Tuesday.

Investors, who were beginning to fear the Fed might have to raise rates, came to the conclusion that the Goldilocks economy was still alive and bid up stocks aggressively. The PPI and CPI numbers that were announced on Thursday and Friday, respectively, showed that core rates were very close to the Fed comfort zone.

May retail sales also came in reasonably strong and supported the expectation that the economy continues to grow though at a rate that is below long-term trends.

The market call for the coming week is therefore positive. We can expect new highs though they may not be significantly above the recent highs. Rates are still well above 5% and market participants are still digesting this fact and trying to determine if it will derail the M&A activity that has been providing so much support for the market lately. On the other hand, sentiment has turned positive again and investors are looking forward to earnings season. The way of least resistance, it seems, is up.

ETF Comments

Indexes: The previous week I set all the indicators in the Weekly Market Call section to question marks. The market did drop but has since recovered and the Market Call indicators are once again set to up arrows. The large-cap indexes DIA and SPY have rallied but did not quite set new highs this week. Still, they each had a good week with 1.6% and 1.7% gains, respectively. The small stock Russell 2000 ETF (IWM) also missed setting a new high but turned in a respectable 1.5% gain. The NASDAQ, as represented by QQQQ, turned in the best performance with a 2.1% gain on the week. All of the averages featured a gap up on Friday. With the positive sentiment in the market now, I can't imagine these being exhaustion gaps, hence, my expectation for new highs.

Real Estate: REITs enjoyed a bit of a rally this week as the Fed Beige Book painted a picture of reasonable strength in the commercial real estate market. Nevertheless, the recent rise in interest rates remains a troublesome factor and REITs lagged the overall market this week. The iShares US Real Estate ETF (IYR) remains deep in the TradeRadar SELL zone and looks weak on traditional charts, as well. The home builders ETF, XHB, also lagged the market. Not only were interest rates a negative factor but the Beige Book also showed that the residential real estate market is still very much struggling.

Financials: the picture is getting murky here. Interest rates are a driver in this sector also. The higher rates may provide greater profit margins but will have the negative effect of reducing demand for loan products. Indeed, while the rest of the market rallied on Friday, the SPDR Financial Sector ETF (XLF) actually dropped a few cents. As mentioned previously, recent rate increases cast doubt on the continued robustness of M&A activity that has done much to bolster the income statements of the broker-dealers. Though XLF remains above its 50-day moving average, it has been unable to close above its 2o-day MA for the last two weeks. There is still the danger of a top forming and the daily chart's TradeRadar SELL signal is indicating caution. The streetTracks KBW Bank Index (KBE) has been in the SELL zone since March but Friday saw some scary action with the ETF falling 1.4% on a downward gap while the rest of the market rallied strongly. Avoid KBE at all costs.

Energy: I haven't written about energy ETFs in a while but I thought I would introduce readers to a new ETF in this sector that is showing some promising action. It is the PowerShares DB Energy ETF (DBE). It is a fairly new ETF that started trading at the beginning of this year. It is unique in that rather than focusing on oil as the United States Oil ETF (USO) does, it is comprised of crude oil, heating oil, gasoline and natural gas. As such it is a play on the energy sector in general. DBE set a new high this week and its recent trend has been solidly upward as opposed to USO which has been choppy and has underperformed its underlying benchmark. As for the Energy Select SPDR XLE, which we used to write about here, they also set a new high this week, trading over $70. Energy prices show no signs of abating and the sector remains a promising one for investors especially with hurricane season coming, political instability in Nigeria, etc. Note that the one area of significantly rising inflation in this week's PPI and CPI reports was energy.

TradeRadar Stock Picks

To view this week's updates on the portfolio of TradeRadar Stock Picks, please visit the Track Profit & Loss page at trade-radar.com



Friday, June 15, 2007

More on Agnico-Eagle Mines

Since Agnico-Eagle Mines may not be well known in the US, I went looking for some analysis that might provide support for the TradeRadar BUY signal. The following is an excerpt from a Business Week article from June 7 titled "Canada's Resource Boom: Five Great Plays" where AEMLW is one of the five:


The weaker U.S. dollar, inflation concerns, and rising demand from the jewelry market out of India, China, and the Middle East with their growing economies have made gold a hot commodity lately. With mining production slipping from a peak in 2001 and more physical bullion being socked away in bank vaults as collateral for gold exchange-traded funds, the supply-demand imbalance has also favored higher prices.

Toronto-based Agnico-Eagle Mines Limited (AEMLW) has only one mine, in Quebec, currently producing gold. But it's poised to grow rapidly as it brings three additional mines in Quebec and projects in Mexico and Finland onstream in the next couple of years. The company has a "tremendous growth profile, and all the growth is coming in politically stable and mining-friendly jurisdictions," says Joe Foster, manager of the Van Eck International Investors Gold Fund. In his view, the stock is undervalued relative to its peers. In addition to trading in Toronto, the American Depositary Receipts trade on the New York Stock Exchange.




Thursday, June 14, 2007

Agnico-Eagle Mines - flashing the TradeRadar BUY signal

If anyone is interested in gold mining stocks, Agnico-Eagle Mines Limited (AEMLW) is flashing a TradeRadar BUY signal.

AGNICO-EAGLE MINES LTD. is a gold producing company and is involved in the acquisition, exploration and development of precious metal properties. The company's operations are located principally in Northwestern Quebec, with exploration and development activities in Quebec, Ontario, Mexico and Nevada, U.S.A.

I can't say that I have any expertise at all in analyzing gold mining stocks. In checking the charts of some stocks with potentially bullish options activity, I came across AEMLW and took a look at it using the TradeRadar software. Based on a time period starting in December, it gave a BUY signal just last week. Not the strongest signal but good enough to give the green light in the TradeRadar dashboard. You can see a pretty clear signal peak has formed in the bottom chart in the image below.



The stock trades on the Toronto Stock Exchange and the New York Stock Exchange and closed at $17.3999 today.

Get more information on AEMLW at the web site of the Canadian newspaper The Globe and Mail by clicking on the following link: Info on AEMLW.



Wednesday, June 13, 2007

Mixed Picture on Real Estate in Fed Beige Book

Today's release of the Fed Beige Book lit a fire under the markets. The Beige Book painted a picture of an economy that was growing at a modest pace without suffering undue wage pressure or other inflationary impacts (except the usual jumps in food and energy prices).

The situation in the real estate sector was another story.

Residential construction is still in the doldrums. There were declines noted in new and existing home sales as well as falling prices and rising cancellations of new home sales. My expectation is that home builders are not yet out of the woods and ETFs like the SPDR S&P Homebuilders (XHB) will see more weakness in the near term. Today's results for XHB, however, were anything but weak as investors, caught up in the euphoria of an overall benign read on the economy from the Beige Book, bid up shares in defiance of common sense. Maybe they didn't read the paragraphs on residential real estate.

The commercial real estate sector appears to be gaining strength and that gave a big boost to ETFs that focus on REITs like the iShares Dow Jones US Real Estate (IYR). Demand is strengthening, vacancy rates falling and office rents increasing. Those districts that mentioned commercial construction activity gave positive reports.

Still, interest rates are the highest they have been in a year and that has to have an effect on the REIT sector. Rates did weaken a bit today, but remain close to their recent highs. One reason the REIT sector has prospered for the last few years is due to liquidity supplied through low interest rates, enabling commercial real estate investors to enjoy "phenomenal returns in the face of poor fundamentals" as Brian Lancaster, head of structured products research at Wachovia Securities, said last year. Furthermore, though residential real estate will be very much effected by the rise in rates, "commercial and industrial real estate, ... will be less affected because the acceleration of economic growth will bring about more demand for real estate, still ...the effects will be negative there. It perhaps will be most serious in the owner-occupied residential housing industry, which is not as strongly affected by swings in the world economy." This last quote is from Jeremy Siegel of Wharton.

As I mentioned in a previous post on REIT buyouts, a lot of real estate is being bought with the notion that there will be exceptional growth in fundamentals, ie, increasing rents and property valuations. There is a good deal of optimism embedded in the current pricing structure for commercial real estate much as there was in the residential real estate market.

It is my view that we are at a risky stage in the REIT cycle with multiple cross-currents at work. We have today's report of positive activity in the commercial real estate market and yet we have interest rates rising. Property prices and rents are relatively high and may not have much room to rise higher. REIT dividend yields are at multi-year lows. If you believe the stock market is a leading indicator, the charts of ETFs like IYR show trouble is brewing.



Sunday, June 10, 2007

Video Stock Analysis added to Investor Toolbox

A quick note to let readers know that we now feature videos of stock analysis courtesy of 3StocksOnFire.com.

Their three most recent video analyses are provided on the TradeRadar Investor Toolbox page under the Stock Analysis heading. Check them out. There is a nice presentation of the chart situation and a discussion of their valuation model. A voice-over explanation is provided throughout so be sure your speakers are turned on.



Weekly Market Update - rate worries take center stage

Weekly Market Call

In last week's Market Update post I wrote that interest rate worries took the wind out of the sails of the market on Friday. This week, the trend continued and the markets sold off.

In the beginning of the week, the markets ignored an 8.3% decline in the Shanghai Composite index and set new records. The next three days saw declines as interest rates moved decisively over 5%, at one point hitting an intra-day day of 5.24%. Bill Gross of Pimco weighed in by declaring we are now in a bear market for bonds.

Fed chief Bernanke made it clear once again that inflation is uppermost on the Fed's mind and added that he expects tighter lending standards to continue to constrain housing demand.

Against this background, anything that confirmed economic growth was viewed as one more reason the Fed would not lower rates. A strong ISM Services Index was therefore viewed as bad. So-so retail sales could not undo the situation.

Around the world, there were more interest rate increases including New Zealand (no big deal) and the European Central Bank. A major brokerage announced that European stocks were set for a double-digit drop and advised selling all European holdings immediately.

By the end of the week, the market managed to recover some ground and the 10-year note ended at 5.11%. The NASDAQ ended down 1.5% but the other major averages finished down closer to 2%. And for a change, M&A activity didn't dominate market news.

ETF Comments

Indexes: last week I gave in and declared all the indexes were heading up (nice green up arrows displayed in the left sidebar). Naturally, they immediately turned in the opposite direction. Now, DIA and SPY sit below their 20-day moving averages and just above their 50-day moving averages. The Russell 2000 ETF, IWM, is sandwiched between these two moving averages as the 20-day is coming pretty close to the 50-day; there is only a one point difference between the two. Looking at the charts starting from the March '07 low, we are seeing moderate strength, short term TradeRadar SELL signals on DIA, SPY and IWM. As a minimum, these signals indicate caution; if the market breaks down further this week, the SELL would be confirmed. There was some perception that some strength remains in technology so the NASDAQ didn't suffer as much as the other indexes. Nevertheless, QQQQ is also showing its moderate strength, short term SELL signal though it actually finished the week rising just barely above its 20-day MA.

Real Estate: the iShares US Real Estate ETF (IYR) was severely impacted by the rise in rates. It's recent rally was nipped in the bud and it remains deep in the TradeRadar SELL zone. The home builders ETF, XHB, was also down this week and is now below both its 20-day and 50-day moving averages.

Financials: rising rates are no friend to the financials either and we saw declines in these ETFs also. As I recently wrote, the SPDR Financial Sector ETF (XLF) might be making a top. That seems to be confirmed now as TradeRadar is flashing a short term SELL signal and is close to a long term sell signal. On a long term basis, with the chart starting back in early 2006, the streetTracks KBW Bank Index (KBE) is still in the SELL zone identified back in March of this year.

TradeRadar Stock Picks

Generex Biotechnology (GNBT) was down another nine cents on no news. Even though I only have a couple of hundred dollars invested, the 22% loss thus far makes me want to dump GNBT rather than wait for some of its pipeline products to finally give the stock a boost.

ProShares UltraShort QQQ (QID) advanced this week as the NASDAQ fell, closing at $47.40 though we are still facing a loss of 2%. As the new week unfolds, we'll see if there is more weakness in store for the NASDAQ or whether the bounce will continue. I am leaning toward an expectation of more weakness and so maintain the position in QID.

Cisco Systems (CSCO) dropped a bit to $26.48, reducing our gain to 2.7%. It's chart is certainly not looking too encouraging but my feeling is that this is a stock worth holding

BigBand Networks (BBND) again continued its weakness, dropping to $16.04. One our best picks is now reduced to an 8% loss. As a recent IPO, I can accept some volatility and continue to believe in the company's future.

SanDisk (SNDK) actually managed a gain this week. At $44.22 we are now back in the positive column with a 1.9% gain. News revolving around more uses for FLASH memory and a slowing in the decline of prices helped.

Millicom (MICC) took a beating after an exceptional performance the week before. MICC closed at $84.50 and our gain was reduced by 10%. We are now showing a modest 6.6% profit.

Qualcomm (QCOM) is a new entry into our portfolio. It was first written about on Thursday night, June 7 (read the post), and purchased at the open on Friday, June 8. The price spiked at the open and, at $42.18, we paid more than expected. Closing at $41.87, we are immediately handed a small 0.7% loss.



Thursday, June 7, 2007

Thursday's Market Action: Rates rise, stocks don't

My two favorite bearish plays have had a good run the last few days. The ProShares UltraShort QQQ (QID) and the ProShares UltraShort Real Estate (SRS) ETFs have been the only glimmer of pleasure in the portfolio lately.

I posted over the weekend that I was struggling with the idea of hanging onto QID in the face of the latest set of new highs on the major averages. I am glad that I did. The precipitous drop in the NASDAQ bears out my fears that the current rally was over-extended. The rise in interest rates and the realization that a market supported by liquidity was vulnerable to rate increases took its toll the last few days. With QQQQ well below its 20-day moving average and close to its 50-day, the chart is looking weak.

As for SRS, it more or less tracks the iShares Dow Jones Real Estate Index (IYR). And, boy, does the IYR chart look bad! Rising rates are a killer for real estate, even REITs, and IYR is certainly taking it on the chin. Having fallen below a trend line a few weeks ago, it had recently rallied based on the buyout of the Archstone-Smith REIT by Tishman Speyer Properties and Lehman Brothers for $22.2 billion. The rally lost steam as it rose to meet the resistance level represented by the previously broken trend line. With the recent interest rate situation, IYR has dived back down. And SRS was up over $5 today.

I wouldn't be surprised to see a bit of a dead cat bounce in QQQQ and IYR Friday. But it seems market sentiment has shifted and now the glass is half full.



Is Qualcomm decline a buying opportunity?

Qualcomm (QCOM) engages in the design, development, manufacture, and marketing of digital wireless telecommunications products and services based on its Code Division Multiple Access (CDMA) technology. It receives significant revenue streams through royalties as well as through manufacturing of chips used in wireless applications. Its products are in wide usage in North and parts of South America, Japan, India and Korea and are generally viewed as cutting edge.

A key competitor to CDMA is GSM, which is prevalent in Europe, parts of Asia, parts of South America and Canada. GSM is considered an older technology. It cannot provide the speed or capacity that CDMA-based technologies offer. GSM systems, by their very technical nature, will eventually approach bandwidth limits.

GSM carriers are moving to a standard called UMTS or Universal Mobile Telecommunications System. This standard is based on WCDMA. WCDMA is short for Wideband-CDMA, a high-speed 3G mobile wireless technology that can offer higher data speeds than CDMA. WCDMA can reach speeds of up to 2 Mbps for voice, video, data and image transmission. Once again, Qualcomm patents are underlying this standard.

On a long term basis, all this seems quite positive for Qualcomm. The wireless world will be moving to use more Qualcomm products and designs. In the short term, however, there have been a host of negative legal developments in the news lately.

On May 29, Qualcomm was dealt yet another setback in its ongoing legal disagreements with wireless world heavyweights, including chipmaker Broadcom (BRCM) and cell-phone maker Nokia (NOK). A federal jury in California found Qualcomm guilty of infringing on three Broadcom patents, awarding $19.6 million in damages.

Separately, the U.S. International Trade Commission (ITC), which in late 2006 found Qualcomm guilty of infringing a different Broadcom patent, decided today, June 7, that new models of cell phones made with Qualcomm semiconductors can no longer be imported into the U.S. because the chips violate a patent held by Broadcom, a federal agency ruled Thursday.

The ITC said the import ban would not apply to mobile phone models that were imported on or before June 7.

The commission's decision represents a compromise between a ban on all phones with Qualcomm chips, as its rival Broadcom requested, and a ban only on the chips themselves, as recommended by an ITC administrative law judge late last year.

Broadcom's patent covers a battery-conserving feature used in mobile phones that transmit voice, video and data at high speeds.

The White House now has 60 days to approve or overturn the ruling. Qualcomm also could settle the patent dispute with Broadcom or appeal the decision to a federal court.

Pressure is mounting on Qualcomm to forge some kind of agreement with Broadcom. The carriers and handset manufactures who use Qualcomm's chips and intellectual property (IP) naturally wish to avoid any disruption to their businesses. In the US, affected carriers are Verizon Wireless, Sprint Nextel Corp. and AT&T Inc.'s AT&T Mobility, formerly Cingular.

So hopefully, all the bad news is now on the table. Between the legal decision today and the weakness in the stock due to the market sell-off this week, we could be very close to a low risk entry point.



Wednesday, June 6, 2007

Introducing TradeRadar Live Market Monitor

Those who read this blog know that in addition to writing about the stock market I also dabble in writing software. I have been experimenting with web widgets lately and I have created a page to monitor the market action during the trading day. It's called the TradeRadar Stock Center - Live Market Monitor.

The page provides a configurable list of quotes that is updated every 30 seconds. There are four small charts that can each be set up to display an individual stock, ETF or index. The charts also update every 30 seconds. (Quotes and charts are courtesy of Yahoo!)

The Stock Market Update feed from Briefing.com is provided. This feed is updated every hour or half hour throughout the trading day. I have provided the feed with a refresh button so you can get the latest update without having to reload the whole web page and possibly lose what you have set up.

If you see something interesting happening on your charts or your quote list, analysis tools are provided so you can search for articles on SeekingAphla.com or check the analysis on StockConsultant.com or AmericanBulls.com. You can quickly jump to a stock's profile on Yahoo Finance or MSN Money. Get a detailed chart from BigCharts.com or StockCharts.com or just do a quick search on blogs or Google. You can even find it on EDGAR.

The beauty of this page is that you can monitor a number of stocks simultaneously without having to refresh the page constantly. And the tools are set up so you can just input a ticker symbol and click a button and you get the information you need.

The page is located at my widget web site, OpenLinkz.com. Check it out at http://openlinkz.com/stockcenter.html



Monday, June 4, 2007

Property Prices a Barrier to More REIT Buyouts?

I recently wrote a post that discussed the potential for another round of buyouts in the REIT market. In that post, I came to the conclusion that there was a good chance we are now witnessing the beginnings of another burst of buyout activity.

There are indications, however, that we may be closer to the end of this cycle of buyouts than the beginning. The Wall Street Journal recently published an article that looked at property prices and how they are affecting dealmaking.

Commercial property, the kind that REITs typically invest in, used to be valued for the stream of payments that could be derived from rents over future years. The ability to raise rents or sell the property at a premium price was looked at as added, but uncertain, value.

Now, deals are being structured that assume both rents and property prices will rise significantly. Therefore, the prices for these deals are much higher than they would be otherwise. It now appears that property prices are reaching levels that are not supported by historical trends in rent increases or property appreciation. Prices per square foot have become so rich, some investors are backing out of deals.

Previously, the ever escalating property market had been aided by the thriving commercial mortgage-backed securities (CMBS) market. The loans that are made to fund these property purchases are bundled into pools and sold to investors who are hungry for yield.

Now CMBS investors are demanding higher yields on these securities. To make matters worse, this is coming at a time when lenders are demanding higher rates for funding these deals in the first place and requiring more equity be put into the deals by the purchasers.

With respect to rates, the 10-year Treasury note, currently trading just shy of 5%, is at its highest level since last August.

Borrowing costs going up, prices for deals going up, risk increasing, investors demonstrating caution. These are not the ingredients for a strong, long-lived buyout cycle. Nevertheless, with strong bullishness in worldwide stock markets and private equity firms sloshing cash all over the place, we will surely see a few more major REIT buyouts before we're through.



Sunday, June 3, 2007

Weekly Market Update - good news and rate worries

Weekly Market Call

Markets were determined to go higher this week. They shrugged off another sizable drop in Chinese stocks and embraced the non-event of the release of the Fed minutes from the last FOMC meeting. More merger news provided a continued underpinning for the bullish action and there was actually some pretty good economic news.

The core personal consumption expenditure (PCE) deflator was up just 0.1% for April. That was below an expected 0.2% increase and brought the year-over-year gain down to 2.0%. That is at the top of the Fed's forecast range of 1.75% to 2.0% for 2007 for the first time since the Fed stopped raising rates and indicates a moderation in inflation. May nonfarm payrolls were up a larger than expected 188,000 and indicated that growth in jobs will support consumer spending and a growing economy in general. Consumer confidence registered an uptick and the May ISM was up slightly and still registering positive growth. First quarter GDP was revised sharply lower and traders looked on the brighter side, saying this positioned the economy for better growth going forward.

The only negative sentiment appeared at the end of the week. The rate on the 10-year bond started backing up to close to 5% and this put a damper on Friday's market action. Though the markets still managed to close in positive territory, large early gains were reduced to about 0.3% for the day.

For the week, the markets turned in a very strong performance with the Dow and the S&P up over 1% on the week and the NASDAQ and the Russell 2000 up over 2% on the week.

It's clear that my call on weakness on the NASDAQ and uncertainty on the S&P was in error or, at best, premature. This market just wants to advance, no matter what. Whether the fundamentals or the technical picture fully justify this bullish sentiment is questionable, but for now it is best to just ride the wave.

ETF Comments

Indexes: Last week I predicted the Dow might show a little weakness and the NASDAQ might bounce up. I was half right. The NASDAQ did bounce up, even more than I expected, and the Dow continued its winning ways without missing a beat. All the index ETFs (DIA, SPY, QQQQ, IWM) had a very strong week.

Real Estate: the iShares Dow Jones US Real Estate ETF (IYR) regained almost all that it had lost in the previous weeks (about 6%) based simply on news of the Archstone-Smith deal. The apartment investment firm agreed to be acquired by Tishman Speyer Properties and Lehman Brothers in a $22 billion buyout. IYR is now flirting with its 50-day moving average. With the overall bullish sentiment in the market these days, this downtrodden ETF may actually be on the verge of a comeback. If interest rates begin to fall back, there may even be a fundamental reason for IYR's gains. As for the homebuilders, XHB was one of the few ETFs that finished down on the week but only slightly. Lately, bad news from major hombuilders hasn't been enought to derail this ETF and it maintains its uptrend.

Financials: Last week I indicated that the SPDR Financial Sector ETF (XLF) might be making a top as it had fallen below its 20-day MA, violated its trend-line and was coming very close to the TradeRadar SELL zone. This week saw a complete recovery with XLF moving up from the danger zone, having found support at a longer term trendline. Certainly no SELL signal to report on XLF this week. As for KBE, the bank index, it is not showing the same kind of strength. It apears stuck in a trading range in an ascending triangle pattern where it is vacillating between $58 and $59. No doubt the interest rate issues mentioned above are acting as an overhang.

TradeRadar Stock Picks

Generex Biotechnology (GNBT) was down six cents this week on, as usual, no news to speak of. We are down 17% and I only continue to hold because I have so little actual cash invested in GNBT that I can afford to wait.

ProShares UltraShort QQQ (QID) dropped to $46.29. We are down 4.3% now. My struggle here is that we have QID in the portfolio because I was aggressive in my interpretation of the TradeRadar SELL signal. Now that the SELL signal has proven to be wrong, do we keep it as a hedge? It is clear the markets are running ahead of the fundamentals, there are fewer and fewer new highs and it seems that at some point M&A fever has got to diminish and let the market take a breather.

Cisco Systems (CSCO) recovered a bit this week as the overall market showed gains. CSCO closed up at $26.86 and our gain is back up to 4%.

BigBand Networks (BBND) continued its weakness this week, falling further to $16.75. We are now down 4%. There was no negative news. We continue to hold based on expectations.

SanDisk (SNDK) looked like it was on the road to recovery but then drooped on Friday. Overall, SNDK managed to end the week at 42.54 and reducing our loss to just under 2%. The good news is that SNDK has at least stayed within its horizontal channel. Last week I was worrying that a move down would throw SNDK into a significant tailspin. For now, we seem to be safe.

Millicom (MICC) is our star of the week. MICC closed at $92.67, up about $7 from the previous week. Our gain is now over 16%. The catalyst was that Standard & Poor's Ratings Services lifted its long-term corporate credit rating on MICC based on strong growth and improving operating performance. Last week I wrote that MICC was starting to look range-bound. Not any more.




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Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.




 
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