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Tuesday, April 29, 2008

NII Holdings bounces off bottom - can it keep up the momentum?

NII Holdings (NIHD) provides mobile telecommunications services in Latin American markets including Mexico, Brazil, Argentina, Peru and Chile.

NIHD was formed in 1996 as a subsidiary of Nextel Communications - now Sprint Nextel (S). The firm exports the Nextel brand to Latin America (in 2002 it sold its operations in the Philippines). Based on Motorola's (MOT) iDEN technology, the service supports domestic and international cellular phone, numeric and text messaging, 2-way radio (Push-to-Talk), and Internet access services from a single handset.

On April 4, the company announced that its first-quarter net profit rose 35% to $113.6 million, or 65 cents per share, from its year-ago profit of $84 million, or 47 cents per share. Analysts had predicted a profit of 63 cents per share. Operating revenue climbed 39% to $993.2 million as the company added 321,700 subscribers. Total customer base now exceeds 5 million.

Just prior to the earnings announcement, Wachovia Capital Markets came out with positive comments. The analysts say NIHD is poised to take advantage of 2 new cellular handsets and continued strength in the company's Brazilian market. Wachovia reiterated its "outperform" rating on NIHD, noting that the recent sell-off was dramatically overdone.

How did I become aware of this stock? I run the TradeRadar Alert HQ process every weekend and scan over 7200 stocks and ETFs. The process applies a number of technical analysis criteria to the price/volume data and generates a list of BUY and SELL candidates. NIHD popped up on the list for the week ending April 18.

Looking at the chart, it is clear that it matches the typical criteria we look for. The stock had been in a prolonged downtrend which appeared to have ended. The TradeRadar BUY signal in combination with trend analysis, confirmation from Aroon analysis and verification that the stock was trading above its 50-day moving average identified NIHD as a potential winner. Reviewing Chaikin Money Flow (over 0.2), DMI/ADX (clearly bullish), PE (modest) and PEG (well under 1.0) further confirmed the BUY signal.

Chart of NIHD
Since April 18, the stock has moved from $40.18 to $45.12, a 12% advance as of the close today. I see, however, that the stock has tumbled in after-hours trading to $43.994, erasing much of today's gain. None of the telecom ETFs have shown any significant negative action after hours so I'm thinking this is company specific.

What's in store for NIHD? Probably some further weakness. The stock is overbought. Technically speaking, it is pushing the upper Bollinger Band and the RSI has moved into overbought territory. The stock is up almost 50% from the bottom established in March. It would not be a surprise to see a pullback.

On the other hand, the company is operating in a part of the world that has undergone significant growth. Latin America has benefited from the rise in commodity prices and, as a result, local economies have been going strong. As in India and China, a growing middle class is emerging as consumers. Odds are this process is by no means over. NIHD should be able to ride this wave.

Wall Street remains positive on the company. Zacks reports that NIHD has been awarded 8 "strong buy" ratings, 2 "holds," and 1 "strong sell." NIHD just launched a stock buyback program, something that most other companies these days have started to curtail. A pullback now should be considered another buying opportunity.

Disclosure: author is long NIHD

Sunday, April 27, 2008

Markets hang tough - bullish bias remains

Markets held steady this past week. Given the big finish on Friday of the previous week, the fact that stocks held their gains without succumbing to profit taking is an indication of wide participation and solid investor sentiment.

The bad news of the week consisted of record high oil prices, Microsoft (MSFT) coming out with lackluster earnings and guidance and Ambac (ABK) coming out with downright horrible earnings. The fact that investors did not let these items derail the current rally shows how much strength the rally still has.

This is not to say, however, that everything is sunshine and roses. The Alert HQ market scan process has provided some sobering information. Each week, using the Alert HQ software, we scan over 7200 stocks and ETFs to see how they are doing with respect to various technical indicators. The results are summarized in the chart below.

Alert HQ Market Statistics, week ending 4-25-2008
Moving average analysis -- overall, still bullish

The moving averages we test show a moderating of upward momentum is taking place. The number of stocks that are above their 20-day moving average dipped a bit from last week and it has not yet recovered to the level of a month ago. The other moving average indicators, however continue to make slow but steady progress. The number of stocks above their 50-day MA increased ever so slightly.

More importantly, the number of stocks whose 20-day MA has made a bullish cross-over above their 50-day MA continues to increase at a nice steady rate. Every week it seems another 300 or 400 stocks move into this category. To me, this is an indication that the market is in the process of making a real change from a bearish bias to a bullish bias.

Other Indicators -- a mixed picture

Two other indicators we measure are Aroon and Chaikin Money Flow. Aroon shows that the number of stocks in a strong up-trend has continued to increase; however, it also shows that the number of stocks falling into a strong down-trend has increased for two weeks now. I am hoping that the increase in stocks in a down-trend is the result of those stocks who missed earnings. Since we are in the middle of earnings season, it is possible that what we are seeing is the effect of positive and negative earnings and earnings expectations and how they are beginning to be reflected in this indicator.

The Chaikin Money Flow indicator identifies stocks that are undergoing strong accumulation or buying. We see this indicator is also steadily moving upward. Not show on the chart is the number of stocks that are undergoing strong distribution or selling. This number has been pretty much flat for three weeks now. The bias here seems to be on the buy side.

Bullish bias remains -- what could hold us back?

The round up of technical indicators discussed above paints a relatively bullish picture of market action. Some of the indicators whose performances are moderating, though, show that the market is perhaps slowing its ascent. What's going on?

There are two factors at work. First is earnings. This was supposed to be a disastrous quarter, reflecting a recession, soaring commodity prices, a weakened consumer and the ongoing credit crunch. What we are seeing so far, however, is that earnings are generally somewhere in the vicinity of "OK". For the most part, it is only the financial stocks and the airlines that are truly turning in awful earnings. Guidance from most companies has been cautious and why wouldn't it be in today's environment? So earnings not being as bad as investors had feared is a positive for this market.

The second factor is the technical setup. Looking at the SPDR S&P 500 ETF (SPY) in the chart below, we can see that we are at a point where a number of indicators all come into play.

SPY, week ending 4-25-2008
We are up against the long-standing resistance at about $140. SPY has failed to break through this resistance several times already. We are up against the downward sloping trend line established back at the October high. We are at the top of the Bollinger Band range, indicating SPY is over-bought. Finally, SPY is just a few points away from its 200-day moving average which is still sloping downward.

It will be a real challenge for markets in general and SPY in particular to break upward through the resistance presented by these multiple indicators. The other major indexes are in more or less the same condition.

Conclusion --

The bullish bias inherent in the market statistics we are collecting leads me to be hopeful. We are seeing a general firming in stock prices across the board. A little patience and no major earnings disappointments from bellwether stocks and we just might see stocks break out and begin a significant move up.

Saturday, April 26, 2008

Alert HQ for the week ending April 25, 2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ. Each week we scan over 7200 stocks and ETFs looking for fresh BUY and SELL signals. This week's results are now available.

Markets eked out fractional gains this week, buoyed by better than expected earnings from many companies reporting but tempered by lackluster results at Microsoft. Despite record oil prices, the major averages managed hold on the previous week's gains and build on them slightly.

The general continuation of a positive tone in the markets has resulted again in a good sized list of BUY signals this week, 22 in all. We only have one SELL signal.

Looking back --

Taking a look at the performance of last week's TradeRadar Alert List, here are some examples of BUY signals and the gains they generated in just five days:
  • An insurance company that received a buyout offer gained 42%
  • A semiconductor equipment manufacturer gained 11%
  • A medical device company gained 11%
  • A little-known agriculture play gained 8%
  • A telecommunications company gained 7%
This is just a small selection from last week's list of 17 BUY signals.

Looking ahead --

As usual, later this weekend I will be writing another post to describe my analysis of the market statistics the Alert HQ software has generated. At first glance, it appears that market internals are turning somewhat mixed. Stay tuned for the full analysis.

Thursday, April 24, 2008

SAFECO chart looks fishy

This past weekend, our Alert HQ market scan identified SAFECO Corp. (SAF) as a BUY. Since then, we heard that Liberty Mutual was making an offer to acquire SAFECO at a significant premium.

I cannot say that Alert HQ has the ability to identify buyout candidates. What I can say is that Alert HQ has the ability to identify stocks that are moving up significantly after a prolonged down-trend.

As can be seen in the chart below, SAF was moving up well in advance of the announcement.

So I am wondering why SAF was moving up so strongly. In the last quarter, the company had registered a drop in earnings and expectations, as with most financial companies, were not particularly bright. What was driving the recent stock price gain? Did some people know this buyout was on the way?

Just something I was wondering about...

Monday, April 21, 2008

More tips for using TradeRadar - timing counts

As I have discussed in the past, the TradeRadar analysis attempts to identify stocks that are undergoing reversals. Given my current bullish attitude, this means that we will be featuring stocks that have declined over the last six months or so and are now beginning to bounce off their lows and show some strength in their stock price.

One thing I have noticed about using the TradeRadar BUY signal is that the stock picks don't carve out a perfect V-shape when they undergo reversals. They tend to hit bottom, then move up fairly quickly, thus triggering the initial TradeRadar BUY signal. Then they tend to back off and go into a consolidation phase after which, if the reversal is meaningful, the stock moves up to new highs.

In this case, there is a good chance that a cheaper entry point can be obtained. Looking at the following chart of Allis Chalmers (ALY), for example, TradeRadar Alert HQ gave a BUY signal toward the end of February and I purchased the stock at $13.16. The stock soon fell to under $12 then began to steadily move up. A little patience would have provided an extra 5% or 6% profit.

Another pattern I have seen is that a stock may move up in anticipation of earnings (and we are in the middle of earnings season, after all) thus triggering the TradeRadar BUY signal. When earnings are actually announced, though, anything less than what investors were expecting can push the stock down quickly.

In this second case, getting hit by an earnings surprise can also be avoided but the timing is trickier. If the earnings release is in the same week as the BUY signal, it can easily be argued that an investor should wait before committing. It can easily mean the difference between being stopped out at a loss or preserving capital for other investment opportunities. It pays to keep an eye on the earnings calendar.

When all is said and done, the two situations described here can be remedied by exhibiting patience. Wait and watch for a bit. If the stock deserves to rally, it eventually will.

What - no shorts?

For those who read this blog on a regular basis, you may notice that for the first time in months our trading portfolio contains no ultra short ETFs. Last week's market action caused them to hit stops with some profits booked and, unfortunately, some losses booked as well.

As discussed in this past weekend's post "Markets jump - stocks poised for more gains?", it looks to me like Mr. Market is trying to sound the "all clear." This is despite the fact that I still feel the economy has problems and that financial stocks, in particular, have a long way to go before they
really deserve the trust of investors. (Indeed, financials took it on the chin in today's trading) Nevertheless, if there is one thing I have learned while on my journey as a financial blogger it is that the market moves as it sees fit despite the economic backdrop or what the experts are saying about it. The famous quote "the market can remain irrational longer than you can remain liquid" is absolutely true.

That was a long way to go to say that for now I am a cautious bull. I am avoiding the quick trades into and out of the ultra ETFs. The easy money was made on these trades after markets started tumbling back in October. Since the January lows we have been in a trading range, and I have come to the conclusion that, not being a full time trader, I am not nimble enough to jump in and out of these ETFs. Of course, many financial advisers would have said it was foolish to believe that it could be done in the first place.

As a result, this blog will be featuring more traditional stock picks based on our weekly TradeRadar Alert HQ market scan process. In other words, I will be putting my money where my mouth is and featuring analysis of the picks I am investing in myself.

Saturday, April 19, 2008

Markets jump - stocks poised for more gains?

Markets jumped this week on solid results from Intel (INTC), IBM, Google (GOOG) and Caterpiller (CAT). Even the financials helped by reporting earnings that were less bad than feared.

As a result, markets are more or less back up to the top of their recent trading range. Looking below at the chart of the S&P 500 SPDR ETF (SPY), you can see that the ETF is pressing up against the same old resistance level around $140. SPY has also moved up close to its top Bollinger Band, indicating the ETF is potentially over-bought. This latest advance has been on decent volume but one worrying aspect is that volume tends to be much higher on the major declines.

Looking at other technical indicators, though, the picture is relatively bullish. You can see that MACD and Aroon are both indicating up-trends in the making. The 20-day moving average has now crossed above the 50-day moving average, creating another bullish signal.

SPY 4-18-2008
The big question, of course, is whether stocks can continue making gains. I think the answer is yes.

Looking at the market statistics we gather from the Alert HQ process, we can see in the chart below that things are looking positive for more and more stocks. After a tough week (see the data points for the week ending 4/11/08), stocks bounced back this week.

Market Statistics, week ending 4-18-2008
Moving average analysis - bullish all the way

We scan about 7200 stocks and ETFs each week to generate the numbers in the chart above. When we see that almost 5000 stocks are above their 20-day moving average, it is clear that a broadbased move is underway. This is reinforced by the fact that over 4000 stocks have also closed above their 50-day moving average. This is the highest number we have seen since we started collecting these statistics back in February. Further supporting the idea that a broadbased and serious up-trend is developing we see that the number of stocks whose 20-day moving average has crossed above their 50-day moving average has continued to increase in a straight line since bottoming in the week ending 3/21/08.

Other indicators --

We are seeing that the Aroon indicators are not as positive as the moving average indicators. The number of stocks in an up-trend as determined by Aroon analysis has dropped somewhat and the number of stocks in a down-trend has actually moved up slightly from last week's level. Does this throw our bullish thesis in doubt? I don't think so. The Aroon calculations have a fair amount of filtering applied and, as a result, it can lag quicker indicators like the 20-day moving average.

Chaikin Money Flow is shown above for those stocks that are showing strong accumulation or buying. As you can see, the number is moving up slowly but surely. What is not shown on the chart is the number of stocks where CMF is showing strong distribution or selling. That number increased very slightly this week. Still, what we measure is strong accumulation and distribution. It may not be such a negative that strong distribution is more or less flat rather than falling. It may indicate a healthy rotation out defensive stocks and into today's leaders.

Conclusion --

We have a good cross-section of stocks participating in the recent up-trend. As pointed out a couple of weeks ago, when breadth is this good, gains are more likely to hold.

We are early in earnings season. As long as no major bellwether stocks surprise with truly horrible results, it looks like stocks are poised to break through resistance and register new gains.

Alert HQ for the week ending April 18, 2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ.

This past week the markets jumped on the basis of good earnings reports from Intel (INTC) and Google (GOOG). Despite awful reports from the financials, investors considered them better than they might have been. The improved sentiment sent stocks to the highest levels they have seen in months.

As a result of all the positive action in last week's market, most of the previous week's Alert HQ stock picks did quite well. This week we see another good group of 17 BUY signals on the alert list. In another sign of positive sentiment, there are no SELL signals this week.

Improvements made to the software this week now provide some important financial indicators for you to use in your analysis when deciding which stock pick may be best for you. We now capture market capitalization, PE ratio, price to sales ratio and the PEG ratio for all stocks. These indicators are, unfortunately, not available for ETFs.

As usual, later this weekend I will be writing another post to describe my analysis of the market statistics the Alert HQ software has generated.

Friday, April 18, 2008

Google beats expectations - why I'm not surprised

There has been widespread discussion in the blogosphere about the rate of growth of paid clicks beginning to fall off at Google (GOOG). This has been a major factor driving the stock's price lower.

After the close yesterday, Google reported profits increased 30% and revenue moved up 46% to $3.7 billion. The company reported net income of $1.31 billion, or $4.12 a share, compared with $1 billion, or $3.18 a share, a year earlier. The EPS figure was well above analyst estimates.

Paid click growth was 20 percent year-over-year, much stronger than the anemic growth rate comScore was estimating.

Another reason --

In this post, however, I want to look at a feature of Google's advertising methodology that is probably less well known to financial bloggers but certainly more well known to search engine optimization (SEO) experts.

AdWords is the system that serves up the text ads that are viewed along side search results. Advertisers associate their ads with keywords that appear in searches. Google uses an auction-based system for its AdWords product that allows advertisers to bid on each keyword to define how much they will pay for a click on their ad.

In my own personal interaction with AdWords, I see continuous keyword inflation. In other words, bids for good keywords continue to rise. If an advertiser wants to be able to have their ad displayed on Google search result pages based on a keyword pertinent to their product offering, they need to continuously monitor the price of the key word and maintain a bid high enough to keep their ad active. Otherwise, the keyword is considered inactive by the AdWords system and the ad gets no impressions.

As competition for the best keywords increases, prices go up. Now that the system is in place, this takes virtually no investment on the part of Google. In this case, it is Google's customers that are driving the increase in ad revenues for Google. If advertisers want search ad exposure, they have no choice but to pay.

This is another reason why the company's business model is brilliant.

Disclosure: author has no position in GOOG

Thursday, April 17, 2008

Sallie Mae - throwing themselves at the mercy of the government

Earlier in the week I wrote a post listing some of the recent events taking place in the student loan industry. The title of the post, "Student loan industry imploding?", gives a flavor of the point of view of the post.

Since then, we have heard that Bank of America (BAC) will stop making private student loans and Citigroup's Student Loan Corp. (STU) has announced they are discontinuing federal loan consolidations and will scale back lending to students at schools where profitability is lacking.

Finally, Sallie Mae (SLM) reported earnings and held a conference call today. The company lost $104 million in its first quarter but somehow expects to stay on track for its full year target.

Problems faced by the company include the fact that financial and credit market turmoil have impacted Sallie's ability to obtains funds and forced the company to mark down various securities and derivatives.

What is unprecedented is Sallie's contention that they are losing money on all the federally guaranteed loans they are making. Main reason: cost of capital bumping up against government mandated interest rate caps. As CEO Al Lord said on the conference call: "we are looking at 175 to 200 basis point decline in the margin of the student loan that does not have anywhere near 200 basis points to play with." The other quote showing up today: "we’ve been predicting something of a train wreck with the absence of credit and the explosion of demand for student credit."

As a result, Sallie is looking to the government for relief. Management has been testifying on Capital Hill and working with the Education Department, Treasury and the White house. CFO Jack Remondi indicates the company is willing to play chicken with the government: "Although we are waiting a potential resolution to this issue from Washington", he says, "I want to be perfectly clear we will not do business that jeopardizes the company’s liquidity position or franchise value." With the volume of loan applications soaring as other lenders pull back from the industry and Sallie's funding lagging the demand for loans, the company says it is constantly evaluating how long it can continue to originate student loans.

At this rate, something's got to give. Sallie Mae is the largest student lender in the US. With the student lending "peak season" of June, July and August rapidly approaching, the company and the industry needs to be stabilized.

Disclosure: author has no positions in any stocks mentioned in this post

Tuesday, April 15, 2008

Student loan industry imploding?

Here is a list of headlines coming from the student loan industry these days. This is just over the last six weeks or so but serves to provide a flavor for the turmoil students and especially lenders are going through.

Click on the story titles for the details.

Big US student loan guarantor files for bankruptcy

Student Loan Stir Hits First Marblehead

TERI, a guarantor that worked closely with First Marblehead, filed for bankruptcy. It has more than $1 billion of assets, and between $500,000,001 and $1 billion of liabilities. Ouch...

Sallie suspends combined federal loans

Sallie has decided to stop doing loan consolidations, even for federal loans, saying the business has become unprofitable. The credit crunch comes to former students now in repay...

Lenders Drop Out of Student Loan Market

Forty-six student lenders have stopped making federally guaranteed student loans, either temporarily or permanently. Recently enacted legislation that reduces profits, difficulties in doing securitizations and even auction-rate securities are having an impact.

Bill Introduced to Limit Effect of Potential Student Loan Credit Crunch

Spellings plans to avert student loan trouble

Congress Introduces Student-Loan Aid For Lenders

The government is trying to come to the rescue of both students and lenders. Some say they caused the problem in the first place with the College Cost Reduction and Access Act (CCRA) legislation.

CIT Ends Student-Loan Originations

CIT has enough trouble in other segments so they will stop making new student loans, both the private and federal varieties.

NorthStar Education to suspend FFEL lending

NorthStar blames the state of the financial markets...

Leading loan lender suspends funding program for next year

New Hampshire Higher Education Loan Corporation throws in the towel...

MOHELA delays payment toward Lewis and Clark Discovery Initiative

Amid the first losses in its history, Missouri's student loan authority is delaying part of a payment toward the state's college construction projects. Not only student loans at risk but buildings, too...

First Marblehead Statement on Recent Actions by Moody's

Ratings agency puts certain notes on review, erodes confidence in securitized portfolio...

Zions dropping out of fed student loan program

Pointing to CCRA legislation, Zions Bank also throws in the towel...

Student loan lender closes, loan origination operation based in Buffalo, NY, shuts down...

M&T, two others end federal student loans

M&T, HSBC and TCF Financial drop out of federal student loan program...

Auctions of student loan bonds fail again

Auction-rate bonds, backed by student loans, fail to sell. Montana Higher Education Student Assistance Corp. says no impact to student loan financing yet...

Conclusion --

The CCRA and the credit crunch have combined to create a one-two punch felt by students and lenders alike.

Lenders are finding it harder to obtain financing to support their loan origination programs. The CCRA Act has slashed their profit margins to the point where many lenders are abandoning the Family Federal Education Loan Program (FFELP). For federal loans, the financing problems are driving up the cost of capital while the government caps the rates lenders may charge, squeezing lender margins. Whereas lenders could previously rely on securitizations to fund loan originations, the securitization market for student loans is now drying up.

Students are finding that lenders are no longer waving fees or providing benefits for on-time payments. Private student loans now require higher credit scores in order to qualify. Consolidation loans are now more difficult to obtain, especially if the total loan balance does not reach a certain threshold.

In an environment like this, the lenders with access to the cheapest funding will remain in business and will likely expand market share as other players abandon the field. The lenders that come to mind are the ones who are part of a large financial institution that extends financing at advantageous rates. Citigroup's Student Loan Corp. (STU) comes to mind as one example.

Luckily for students, the student loan industry is huge and loans are generally still available. And, as usual, the government is lender of last resort with their direct lending program.

Sunday, April 13, 2008

Market internals converge - what does it mean?

Last week's market statistics led me to comment that it is hard to be a bear with market internals looking pretty good. I still had, and have, a few of the ProShares ultra short funds in my trading portfolio. This week's statistics as gathered by Alert HQ market scan show some weakness returning to stocks.

The week's numbers in review --

Each week, we scan about 7200 stocks and ETFs to generate our statistics and alert lists. This week, I am struck by the convergence of indicators right around the 3000 mark. Is it a coincidence or is there something meaningful here?

Market Statistics, week ending 4-11-2008
In the chart above, we see that this week the indicators are starting to diverge. Last week all the positive indicators were moving up in unison. This week we see the fastest moving indicators reflecting drooping stock prices earlier in the week and the more pronounced sell-off on Friday.

The number of stocks over their 20-day moving average dropped from 5000 to 3000. Yikes! This is the largest move, in either direction, I have seen since we started collecting the data back in February. Similarly, the number of stocks that closed above their 50-day moving average dropped from 4000 to 3000, another big change.

The slower moving indicators managed to continue in the positive direction. Aroon, for example, shows that the number of stocks indicated to be in strong up-trends moved up from about 2400 to 3000. Conversely, the number of stocks indicated to be in strong down-trends stayed essentially flat at a level just under 1000.

Interestingly, though statistics for both 20-day and 50-day moving averages deteriorated this week, the number of stocks whose 20-day moving average closed above their 50-day moving average actually increased this week from 2500 to just over 2800.

We have added Chaikin Money Flow as an indicator to the chart this week now that we have enough data points to identify whether a trend may be developing. Our scan looks for stocks or ETFs showing reasonably strong accumulation. As can be seen in the chart, the number in that category is still small though it is slowly increasing.

Analysis and Comparisons --

So where does this leave us and how does it relate to the major stock indexes? As we did last week, we'll look at the SPDR S&P 500 ETF (SPY) and see if we can draw some conclusions.

Last week we pointed out that, with SPY in the neighborhood of $139, breadth had improved quite a bit relative to the last time SPY had moved up into that range. Back in February, breadth was weak, the 50-day moving average provided too much resistance and SPY failed to push through $139 or its 50-day MA. This time SPY pushed on above the 50-day MA but this Friday it fell back and closed below both this important moving average and the $139 resistance level. And in an interesting similarity to our market statistics, SPY's 20-day moving average is almost exactly touching its 50-day moving average.

This makes the third time that SPY has failed to push above the $139-$140 range. This resistance level continues to present a real challenge. In addition, SPY has failed to push upward through a downward sloping trend line drawn from the peak at the October high.

Other technical concerns related to SPY include a bearish development in the DMI, where -DI just crossed above +DI. Chaikin Money flow has actually turned negative this week, indicating distribution has started.

Two weeks ago the economic reports were uniformly bad and the markets held their ground. This past week, there wasn't all that much important economic news but earnings season got off to a bad start with Alcoa (AA), UPS and especially General Electric (GE) taking the entire market down including SPY which lost about 2.7%. To see 2000 stocks fall below their 20-day MA while the S&P loses only 2.7% is definitely disconcerting.

Conclusion --

So this week, market breadth has deteriorated but is still equal to or better than it has been in weeks. It is alarming, though, to have seen so many stocks fall below their 20-day moving averages so quickly. Apparently, many stocks had been barely hanging in above the 20-day MA and it took just one tough week to push them down below that level again. It also seems to me to be an indication of how skittish investors remain these days.

One positive we can point to, however, is the fact that the number of stocks with the 20-day MA above the 50-day MA is increasing. This indicates that strong stocks continue to be rewarded. Many other stocks, however, seem to have merely risen along with the market in general and as soon as the selling began, investors abandoned these stocks. I believe this is what's behind the 2000 stocks that dropped below their 20-day moving averages this week. The sheer size of this number indicates that both weak stocks and mediocre stocks are having trouble finding buyers.

So I remain cautiously hopeful. As earnings season progresses we will undoubtedly see offending stocks sold off strongly. If the breadth we have built up so far continues to hold, though, there is a good chance that profitable stocks will hang onto gains. In other words, my expectation is the entire market will not plunge to new lows.

Oh, and what about the convergence of all these indicators? A numerical anomaly that indicates we are at a crossroads. But then the market always seems to be at a crossroads lately, doesn't it?

Saturday, April 12, 2008

Alert HQ for the week ending April 11,2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ.

The week on Wall Street saw the markets begin to crumble after strong gains the previous week. Negative earnings surprises from Alcoa (AA) and General Electric (GE) accelerated the losses, especially on Friday.

The major averages closed the week just below their 50-day moving averages and the TradeRadar market statistics reflect a mixed picture now as some of the recent broad-based strength has weakened.

As a result, this week we have a more modest alert list of 19 BUY signals and 2 SELL signals.

Improvements made to the TradeRadar software this week provide more detailed information on the DMI determination for each stock on the alert list. My recent post "More tips for TradeRadar users" discussed using the indicators provided in the alert lists and recommended using to view the indicators on a chart. also provides great explanations of these indicators and how to use charts, in general. Check out their Chart School link at the top of their pages.

As usual, later this weekend I will be writing another post to describe my analysis of the market statistics the Alert HQ software has generated.

Friday, April 11, 2008

GE finally convinces investors that manufacturing is in trouble

This post is for those who appreciate a little irony.

I have written two recent posts about trouble in the manufacturing sector. The first one discussed the Fed's manufacturing report in mid-March and a couple of regional Fed surveys. The second post discussed the Durable Goods report released toward the end of March.

My position at the time was that all these economic reports supplied by the government indicated that industrial stocks were due for a fall.

Based on my outlook, I entered a small position in the ProShares UltraShort Industrials ETF (SIJ). My timing was horrible as the entire market immediately made a strong move up and left pretty much all the ultra short funds reeling. Eventually, SIJ hit a stop and the position was closed with a loss.

Today, General Electric (GE) reports an unexpected shortfall in earnings and industrial stocks and related ETFs plunged while SIJ jumped up 7.88%.

Irony #1: GE's reason for the decline in earnings: primarily problems in the financial sector.

Irony #2: The infrastructure portion of the business turned in double-digit gains. In other words, one of GE's biggest manufacturing operations performed better than any other business segment. Yet industrial companies, in general, took a hit.

By way of providing further detail, NBC/Universal was singled out by analysts as showing weak growth. Still that was better than the negative growth in the healthcare segment (off 17%), Commercial Finance (down 20%) and GE Money (down 19%). In the overall industrial segment, profit growth was down 16% despite the success of the infrastructure operation.

During the conference call, however, the company did admit that conditions in the U.S. are slowing and that, generally speaking, it is a "tough environment". Appliances and NBC/Universal were identified as segments that would be "an early warning" to problems in the economy.

GE says it is "not counting on the business getting any better, vis-à-vis...the U.S. consumer" for the rest of the year. Accordingly, it lowered its projections for 2008 by 5% to 8%.

Irony #3: The government generates all these reports which may move the markets for a day or two but no analysts actually change their views on the bellwether companies that might be affected. Finally, GE confirms the bad news in the reports and the market finally buys into the idea that maybe manufacturing is hitting a rough spot. A market sell-off ensues.

Apparently, I am not the only one who was expecting problems with industrial/manufacturing stocks. In a Wall Street Journal MarketBeat interview with Phil Orlando of Federated Investors, he had the following comment regarding GE: "They missed the quarter badly and as you dig through the data you find they had three problems: one is financial services, one is domestic appliances, which is a quasi-housing play and the third area was, surprisingly, health care. Two of the three misses on GE’s earnings were altogether predictable." Predictable how? The same reports I referred to above were probably among the sources. And the well-known slowdown in all industries related to housing easily translates into declines in a number of manufacturing sectors.

At any rate, SIJ closed today at $63.23 and GE closed at $32.05. What price they will be trading at in a few months?

Silicon Alley Insider - Pathetic GE: Blame Bear Stearns for Our Mess

MarketWatch - General Electric's quarterly net off 6%; outlook cut

MarketBeat - Q & A: Phil Orlando, Federated Investors

Disclosure: author has no position in GE nor SIJ

Wednesday, April 9, 2008

More tips for TradeRadar users

As I continue to use the TradeRadar software to analyze many different stocks in various situations, I am getting a better feel for the strengths and weaknesses of the BUY and SELL signals. There are definitely a few nuances users should be aware of when trading based on the signals.

Beware of earnings announcements --

Let's use a BUY signals as an example. Things will work the same for a SELL signal except in reverse.

When a BUY signal is generated, it is the result of a clear downward trend being broken. The stock has made a bottom and begun moving up. The downtrend may have lasted six months, a year or even more. Given the fact that the stock has been in a bearish phase, there is a certain amount of risk in buying the stock. We often see false rallies within bearish trends and there is always the potential that a BUY signal is a trap.

This is why I always recommend that users of the software do some research to become comfortable with the stock generating the signal. It is always worthwhile to verify that the fundamentals are turning positive and the TradeRadar signal is confirmed by a few other technical indicators.

I bring this up because earnings season is upon us. We often seen extra activity in a stock just prior to its earnings announcement. There are times when this activity moves the stock enough to generate a TradeRadar signal. If the earnings announcement is positive, the stock continues the new trend identified by TradeRadar. If the earnings announcement is not so good, the stock can get slammed. Hence, it pays to be extra careful at this time of year and look for confirmation of the signal.

Those who have purchased the TradeRadar Alert HQ lists of stock signals know that I always provide several technical indicators with each stock pick. These indicators include 50-day moving average assessment, DMI, Aroon and Chaikin Money Flow. These same indicators can be viewed at and I would encourage users to take advantage of this great, free site to assess the charts of stocks that have generated signals.

Look for good entry points --

Another aspect of the how the TradeRadar software generates signals is the fact that a stock has to begin moving before the signal will manifest itself. In the case of a BUY signal, after a downtrend completes, some stocks then move up quickly. What I have observed in these cases is that by the time a signal has been generated, the stock has moved into a somewhat overbought state. This can be seen by looking at RSI or Bollinger Bands. Looking at the charts at, a user will often see the stock pressing up against the upper Bollinger Band.

In this kind of situation, it can be prudent to wait. Often the stock will back down toward the midpoint of the Bollinger Bands. In terms of timing, it may be more appropriate to initiate the trade at this point. It provides a lower risk entry point.

I hope users of TradeRadar find these tips helpful. If anyone has tips they wish to share with the community of users (and there are about 500 of us now) please feel free to comment on this post or begin a discussion on our user group forum.

Tuesday, April 8, 2008

Google close to a Buy signal

It is somewhat mystifying to read financial blog posts about Google (GOOG) that imply the company does nothing but search advertising. Analysts obsess over Google's share of search traffic, their search ad click-through-rates, etc.

Though the search advertising business has undoubtedly been the largest driver of Google's business, the company has strong revenues from its AdSense product which is, in essence, a very loose ad network. Indeed, fully one third of Google's profits are derived from AdSense.

Another source of annoyance to me is the opinion that search advertising is the only valid online advertising model. Those who hold this view generally assume that display advertising is dead and banner ads are obsolete.

Google has now closed the deal to acquire DoubleClick. DoubleClick's business is focused on serving display ads on their own ad network. Did Google make a mistake? Hardly.

According to eMarketer, expenditures for search advertising are about twice as high as for display advertising. In 2007, that came to $8.44 billion for search ads and $4.458 billion for display ads. These proportions are expected to remain steady even as search ad spending doubles between now and 2012 and alternate forms of marketing become more acceptable (rich media/video, etc.)

The upshot is that there is still serious money on the table in the form of display ads and that is why Google opted to acquire DoubleClick. The combination of Google and DoubleClick is a two-headed beast. According to the blog, "DoubleClick and Google dominate overall market share capturing 35% and 34% of unique users, respectively." The blog further states that: "DoubleClick owns the head and Google owns the tail. For sites with over 1MM monthly unique users, Doubleclick has a 48% share, a 3x advantage over 2nd place Yahoo. For
sites with less than 100k monthly unique users, Google has an 8x share advantage over 2nd place MSN."

There are a couple of takeaways from this analysis. One is that search advertising is clearly not the only game in town. Second, the combination of Google and DoubleClick is far stronger than either one alone and definitely stronger than their major competitors. The strength in the combination lies in the breadth of the offering. DoubleClick has built an ad network utilized by some of the biggest sites on the web and focused on display ads. Google has also built an ad network but it is based on the thousands of sites, big and small, that have signed up to host AdSense ads. Add to this mix the dominant search ad business that Google pioneered and it is clear that Google is turning into an even tougher competitor. AOL, Yahoo and Microsoft are increasingly being left behind.

With analysts projecting a decline in paid clicks, Google has seen its stock price hit the skids. It bottomed out in March at around $413 and now, at about $467, is just under its 50-day moving average. Many technical indicators are starting to line up positively. As can be seen in the chart below, MACD is currently bullish and Aroon is indicating an up-trend is beginning. Though not shown in the chart, DMI is just starting to swing positive. Also not shown is the Chaikin Money Flow which, similarly, is starting to show growing accumulation. With the stock up against the top of its Bollinger band range, it would not be unexpected to see it retrace a part of its recent advance. Barring another big drop in the overall market or a big earnings miss, it seems the company is poised to break out.

Chart of GOOG
It is true that the current economic malaise does seem to be having an impact on e-commerce and Google will, no doubt, find it hard to escape seeing profits pulled down to a certain extent. Nevertheless, the company's growth rate has not come close to going negative though many analysts feel it may be slowing.

With the integration between Google and DoubleClick barely started, it is not unreasonable to expect that eventually the combination of the two companies will result in a whole that is greater than the sum of the parts. As pointed out above, the two companies are complementary and dominant in their areas of expertise. As long as the company cultures mesh reasonably well, it is logical to expect these two companies to build on their strengths and continue to extend market share. That has to be beneficial to Google's share price.

Another View of Google's Dominance, Get your fair share of the ad network pie

Disclosure: author has no position in GOOG

Monday, April 7, 2008

Cirrus Logic - overbought or room to run?

Cirrus Logic (CRUS) is a semiconductor manufacturer focused on mixed-signal and analog integrated circuits used in consumer and industrial markets. The company specializes in various audio/visual applications, DVD recorders/players, home theater systems, analog-to-digital and digital-to-analog converters, embedded microprocessors, etc.

Cirrus Logic was identified a couple of weeks ago in our Alert HQ market scan as a BUY. Since then it has gained well over 20%. Just take a look at the chart below.

Chart of CRUS
There appear to be several recent drivers for the excellent stock performance.

An SEC investigation in the company's stock option practices was concluded with no recommendations for enforcement actions.

The company is closing a Chinese subsidiary, Caretta Integrated Circuits, thus removing a management distraction.

The stock was upgraded by an analyst at Thomas Weisel Partners. The call was based on a report that Wolfson Microelectronics, a competitor of Cirrus, wasn't selected by a major customer for inclusion in the next generation of its portable media player. It is thought that the customer is Apple. The analyst is looking at this as an opportunity for Cirrus Logic to gain market share. Cirrus has already won a contract to provide chips for the iPod Classic and it probably has the inside track for the new version, as well.

All of these events transpired in March. The stock had already bottomed out and turned up by the beginning of March. In the middle of the month the stock really took off and moved up about 25%. Still, these events by themselves don't seem important enough to have pushed the stock up that much. It appears that the company is on track to start growing earnings again and that, I would submit, is the primary driver.

Over the last four years, the company's revenues have been slowly decreasing on an annual basis. Earnings on an annual basis have been quite erratic including a loss in 2005.

The picture brightens somewhat when we look at the last four sequential quarters. Revenues have been up the last two quarters, registering 14% and 4% quarter over quarter gains , respectively. Expenses have been problematical with elevated R&D and G&A costs causing operating earnings to swing negative in the most recent quarter. Nevertheless, the company posted income of $4.2 million in the most recent quarter versus a loss of $0.3 million in the previous quarter.

Over the last few quarters, the company has absorbed a number of restructuring charges and losses on sale of investments. The closing of the China subsidiary will hit the income statement for another $11 to $13 million in charges.

It is not surprising to see the stock's RSI firmly in the over-bought range given the recent run-up. Still, it is hard to see how the stock can hold on to these gains given the financial backdrop. Indeed, Monday's action saw the stock give back 4.5%. I can only assume that the flow of business from Apple is expected to turn into a tsunami.

Saturday, April 5, 2008

Hard to be a bear with market internals like these

Market internals just keep on improving, regardless of the news on the economic front. This week's statistics as gathered by the Alert HQ market scan shows stocks are clearly on the road to recovery.

Market Statistics for week ending 4-4-2008
Looking at the chart above, we see all the positive indicators are now moving in the same direction - up. For most of them, this is the highest they have been in the seven weeks since I starting collecting the data.

The number of stocks above their 20-day moving average has jumped to nearly 5000, well over half of the 7200 total stocks that were scanned for this report. Stocks above their 50-day moving average have jumped to nearly 4000, a big improvement over last week and an acceleration in this indicator that had previously been trending upward at a slower rate.

Aroon shows similar acceleration with the number of stocks exhibiting up-trends jumping from barely over 1000 up to 2500. The number of stocks exhibiting down-trends dropped from just under 2000 to just under 1000.

The number of stocks whose 20-day moving average has made a bullish crossover above their 50-day moving average has continued to increase at a moderate pace, reaching a count of just over 2500. This slower moving indicator has been moving up for two weeks now while the others have been moving up for four weeks.

We have been collecting data on Chaikin Money Flow for four weeks now though we are not showing it on the chart. This is the first week where the number of stocks showing strong accumulation has exceeded the number of stocks showing strong distribution. Buying definitely picked up this week.

Then and Now --

Below we have the chart of the SPDR S&P 500 ETF (SPY). We see that this week we reached a level on SPY (about $138) that is just about where we saw the last peak back in late February. After that last peak, SPY sold off strongly and made a new closing low. Now that we are back at the same level, what's different?

Chart of SPY
It is useful to contrast market internals for this week with the data collected the week of the February peak. In the post that I wrote at the time of the February peak, I looked at the same data and most of it was negative. The sell-off in the latter part of the week ending Feb 29, when the peak occurred, drove all of the positive indicators down. It is important to note that none of them were at high levels in that week or the week previous. Market breadth was extremely weak and there should have been no surprise that the rally faltered.

So here we are again in the middle of a rally and investors are nervously wondering if it can continue. The Alert HQ market statistics this time show stocks to be in far better shape now than they were back in February. The number of stocks in up-trends or above their moving averages shows that many more stocks are participating in the rally this time. In February, it was only a select few that pulled the indexes up.

Another difference between February and now lies in the impact of economic news on market sentiment. In the week ending February 29, we had bad news from the Chicago PMI, PPI showed signs of inflation, consumer confidence plunged and consumer spending was reported to be flat. This week we had more big bank write-downs, Bernanke suggested a recession is possible, weekly initial claims exceeded expectations and non-farm payrolls declined more than expected. Normally, this kind of awful news would have sent markets into a tailspin. This week investors stood firm and the indexes held very nearly all their gains.

So, have we seen the bottom and should investors rush out and buy SPY? From the limited data available, it is clear that market internals are stronger than they have been in quite a while. It is too early to say whether we have seen the bottom but there is reason to be optimistic about the current rally. That being said, there are still challenges ahead.

Using SPY as a proxy for the market in general, the chart above shows that we have been here before. We see we are still below a resistance level at $139-$140. We are again at the upper limit of the Bollinger bands. Both will test this rally.

In February the rally failed at the 50-day moving average, now we are already above the 50-day moving average. Where it was resistance in February, the 50-day has turned into support today. Now Aroon and DMI indicate up-trends but with questionable strength. In February, these indicators were absolutely bearish.

So many stocks have jumped this week that it wouldn't surprise me to see a pullback or some kind of consolidation. We are not far from earnings season and the "event risk" of unexpected bad earnings reports from various industry bellwethers could also knock the markets back. And there may still be some landmines left in the financial sector.

Conclusion --

Market internals argue for continued strength but charts argue for caution. The market is healthier than it has been in weeks and I believe the benefit of the doubt should be given to the bulls.

Alert HQ for the week ending April 4, 2008

This post is to announce that the latest list of stock alerts is up and available at Alert HQ.

The week on Wall Street saw a huge rally and, despite day after day of bad economic news, stocks managed to hold almost all their gains. The major averages are now sitting on top of their 50-day moving averages and the TradeRadar market statistics reflect quite a bit of broad-based strength.

As a result, this week we have a big alert list of 64 BUY signals and no SELL signals!

Some work was done on the TradeRadar software this week to improve the DMI calculations. I would like to refer purchasers of the alert list to to look up some of the recommended stocks and view their charts. provides the ability to add to the charts a visual indication of all the technical analysis calculations we do except the proprietary TradeRadar signal and trendlines. Note that the DMI is called "Wilder's DMI (ADX)". They also provide Aroon and Chaiken Money Flow chart overlays as well as moving averages. Note also that TradeRadar uses exponential moving averages which tend to be more responsive than simple moving averages.

Later this weekend I will be writing another post to describe my analysis of the market statistics the Alert HQ software has generated.

Wednesday, April 2, 2008

Does Littelfuse justify the recent run-up?

Littelfuse (LFUS) has showed up as a selection in our Alert HQ lists twice now. The first time was in February based on daily price performance data . Just recently it popped up in our scan based on weekly data.

LFUS exhibits a classic chart showing a prolonged decline culminating in a reversal to the upside. Why the reversal? What is driving this run-up in the stock's price?

Background --

Littelfuse, Inc. manufactures and sells circuit protection and electrical fuses for the electronic, automotive, and electrical markets in the Americas, Europe, and Asia-Pacific. It offers electronic circuit protection products, such as fuses and protectors, positive temperature coefficient resettable fuses, varistors, polymer electrostatic discharge suppressors, discrete transient voltage suppression (TVS) diodes, TVS diode arrays and protection thyristors, gas discharge tubes, power switching components, and fuseholders, blocks, and related accessories.

In the electronics market, the company supplies leading manufacturers such as Alcatel-Lucent, Celestica, Delta, Flextronics, Foxconn, Hewlett-Packard, Huawei, IBM, Intel, Jabil, LG, Motorola, Nokia, Panasonic, Quanta, Samsung, Sanmina-SCI, Seagate, Siemens and Sony.

The company is also the leading provider of circuit protection for the automotive industry and the third largest producer of electrical fuses in North America. In the automotive market, the Company's end customers include major automotive manufacturers in North America, Europe and Asia such as BMW, Chrysler, Daimler, Ford Motor, General Motors, Honda Motor, Hyundai and Toyota. The company also supplies wiring harness manufacturers and auto parts suppliers worldwide, including Alcoa Automotive, Auto Zone, Delphi, Lear, Pep Boys, Siemens VDO, Sumitomo, Valeo and Yazaki. In the electrical market, the company supplies customers such as Abbott, Carrier, Dow Chemical, DuPont, GE, General Motors, Heinz, International Paper, John Deere, Lithonia Lighting, Marconi, Merck, Otis Elevator, Poland Springs, Procter & Gamble, Rockwell and 3M.

The Numbers --

In early February the company released their earnings report for the 4th quarter and for the entire 2007 fiscal year. Results were somewhat mixed but leaned to the positive side.

Sales increased 6% over the fourth quarter of the previous year and adjusted diluted earnings per share of $0.38 increased 52% over the prior year adjusted earnings per share of $0.25. Full year 2007 sales were just over $536 million up only slightly from 2006, but still a new record for the company.

Analysts, on average, were expecting a profit of 36 cents per share in the 4th quarter, according to a poll by Thomson Financial. To the company's credit, they managed to beat expectations.

Gross profit was $171.5 million or 32.0% of sales in 2007 compared to $161.3 million or 30.2% of sales in 2006. The gross profit margin percentage improvement resulted primarily from lower restructuring charges in 2007 compared to 2006.

Operating income in 2007 increased 77.8% to $51.3 million or 9.6% of sales compared to $28.9 million or 5.4% of sales in the prior year. The changes in operating income and operating margin were due mainly to lower restructuring charges and decreased bonus expense in 2007 as described above.

Net income in 2007 was $36,835,000 compared to $23,824,000 in 2006.

Income per share in 2007 was $1.64 versus $1.06 in 2006.

Though the electronics segment did not grow as strongly as expected, the company achieved record growth in the automotive and electrical segments. Geographically, there was strong growth in Asia, especially China and India. In the off-road truck and bus segment, a relatively new area for the company, they achieved strong double digit growth in 2007 over the prior year.

Looking Forward --

Sales for the first quarter of 2008 are expected to be in the range of $134 million to $138 million which represents 2% to 5% growth over the prior year quarter.

Earnings for the first quarter are expected to be in the range of $0.32 to $0.37 per share. Sales for the year of 2008 are expected to increase 5% to 7% compared to 2007. For the second half of the year, being stronger than the first half due primarily to increasing new product sales, diluted earnings per share for the year 2008 are expected to be in the range of $1.80 to $1.90. Earnings are expected to be stronger in the back half of the year due to higher sales and increased cost savings.

The company has initiated a series of projects beginning in 2005 to reduce costs in its global operations by consolidating manufacturing and distribution into fewer sites in low-cost locations in China, the Philippines and Mexico. 2008 will be another transition year in which expenses and capital spending related to the manufacturing transfers continue to impact margins while savings from these transfers are only beginning to ramp up. In 2009, the savings are expected to increase substantially and the transfer cost will begin to decline. As a result, earnings are expected to increase to $2.50 per share in 2009. Cash flow should return to more normal levels.

Conclusion --

The company operates in what might seem to be a mundane sector; however, much of today's increasingly complicated and sensitive electronics equipment relies on circuit protection. Whether the electronics are in cars, factories, TVs or in your your basement or your pocket, there is a good chance that one or more circuit protection devices are included. The market for these devices is large and growing.

LittelFuse seems to be on a path to increased profitability. The aggressive strategy to reduce costs and an emphasis on new products will yield payback in the near future. In the meantime, the company is taking advantage of strong growth trends in flat panel TV sales and laptop PC sales and ramping up in newer markets like off-road vehicles and buses. The company's sales are geographically dispersed. While the U.S. may see a slowdown in passenger car sales, for example, management predicts continued strong growth in Asia.

With the company already up 16% from when we first recommended them on Feb 23 at $31.04, there seems to be a good chance the stock is ready to take a rest. It may be a good buying opportunity.

Disclosure: author has no position in LFUS

Tuesday, April 1, 2008

Writedowns + Contraction = Rally???

OK, so UBS writes off $19 billion and cans the chairman. The ISM survey shows continued contraction in manufacturing, specifically declines in new orders and increases in materials prices. Lehman says they have no liquidity problem but they feel it is worthwhile to dilute present shareholders by issuing preferred shares.

Last week this news would have sent the markets into a tailspin. This week it instigates a rally in stocks and the U.S. dollar as well.

So where does that leave us? Looking at the S&P 500, it seems everything is set for more gains. Today's action takes the index significantly above its downward sloping trendline and its 50-day moving average. Volume was good though not as heavy as bulls would have liked. We saw an accelerated rotation out of bonds and commodities and into the most beaten down sectors - financials, retailers and tech. Market sentiment is extremely positive - all news is good news.

What could hold us back? There is a resistance level in the 1390 range, just a little way above today's close. This level is based on the lows made in March and August of last year. The index has twice tried to make a significant move above this level and failed both times.

We have a long way to go before we reach the 200-day moving average which, by the way, has clearly turned down starting in the beginning of February.

And finally, there is the matter of fundamentals. I've already mentioned the ISM survey. At 48.6 it was better than expectations but just a fraction above last month's level. In any case, being under 50, it still represents contraction in the manufacturing sector. The construction industry also registered continued declines. Automakers reported sharply lower sales. We've seen consumer spending flatten. Morgan Stanley is out with a report stating we are in the worst banking crisis in 30 years. Then there are the proverbial "shoes" yet to be discovered but ready to drop at an inopportune moment.

Today, none of that mattered. In the spirit of the day, I can't wait for Citi to report another $14 billion writedown, as Goldman expects it will. I'm sure the markets will rocket higher again.

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