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Showing posts from June, 2008

Alert HQ for the week ending 6-27-2008

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.

The markets tumbled again this week, with the S&P 500 down 3.0% after falling about 3.1% the previous week. At this point the Dow, the NASDAQ and the S&P 500 all have double digit losses year to date.

The Fed met this week and kept rates unchanged. Having delivered hawkish comments on inflation prior to the meeting, the statement merely echoed the recent party line. Economic reports such as durable goods and PCE came in at levels that supported the Fed's characterization of economy activity as "expanding". Nevertheless, the combination of further downgrades of financial stocks, rising oil prices and tech bellwethers offering downbeat guidance conspired to keep stocks on a downward path.

As can be expected, this is making it difficult to find good stock alerts on the BUY side and is putting…

ProShares ETFs - why trading volume makes a difference

ProShares has a diversified lineup of ETFs that allows investors to adopt various strategies based on individual sectors, market-cap, desire to be long or short, etc.

Of the 64 ETFs currently offered, it is clear that some are more popular than others. This popularity is translated into trading volume.

Why volume matters --

The greater the volume, the smaller the bid/ask spread tends to be. Higher spreads are like a hidden fee that subtracts from investor returns. This is especially of concern to short-term traders.

On a related note, an investor might ask if this is a liquidity issue. Is it related to the liquidity of the stocks that make up the ETF? According to IndexUniverse.com, research shows that it is the liquidity of the ETF, and not the liquidity of the underlying components that really matters.

Lower volume can be associated with higher expense ratios. The heavier trading volumes associated with larger funds implies that these ETFs can spread their expenses over wider ownership b…

Two ProShares inverse ETFs not yet overbought

I wrote a post this past weekend that identified the strongest BUY and SELL signals in the ProShares lineup of ETFs.

All the strongest BUY signals belonged to the short and ultra-short ETFs.

With the market looking shaky today amid bad news from UPS, continue strength in oil, further weakness in home prices, etc., it didn't seem unreasonable to think about a little downside protection.

In the weekend's post, I cautioned readers that it is dangerous to chase the ultra ETFs. They can change direction on a dime and moves of 2%, 3% or more per day are far from uncommon. It may be best for now to stay away from those ETFs that are already on the list of strongest performers.

An alternative is to look at those ETFs who were not on the list of strongest signals. Notable by their absence in the list of strongest BUY signals were the Ultra-Short MidCap 400 (MZZ) and the Ultra-Short QQQ (QID).

These two inverse ETFs having been moving up since the recent market peak in mid-May but not nearly…

The Trouble with Trend Reversal Indicators, Part 2

Having been working with the Trade Radar trend reversal indicator for over a year, it is time to talk about insights I have gained. This article is a continuation of the original post titled "The Trouble with Trend Reversal Indicators".

This post is concerned with "follow-through" or the ability for a new trend to fully establish and maintain itself. In other words, did the stock throw a head-fake or did it truly do an about face?

Trend reversals tend to be driven initially by internal factors affecting a stock: earnings or buy-out rumors, for example.

There are also external factors that affect a stock. In the first post we talked about "event risk" or things that come out of the blue that would not have been predictable after having read an 8-K.

One of the more formidable external factors for an individual stock is the market itself.

In my observations, I have seen a number of stocks generate great looking BUY signals. Many of these stocks did see some good …

Can the Saudis keep us from testing the March lows?

I keep thinking things can't get any worse and then they do.

For example, I felt that whether or not all the bad news was revealed by the large banks, it was a foregone conclusion that these stocks would be dogs for months to come. Along came more news of write-downs and capital raising and, to my surprise, it took the market down as if it was something unexpected. Add to that the downgrade of the bond insurers and we had all the excuses needed for a sell-off.

Then we had the sectors most affected by high oil prices. Ford, GM and Fed Ex all contributed to the negative mood in the market this week but, once again, who would ever expect these stocks to do well in the current high cost energy environment?

I have pointed out that recent economic reports continue to be better than awful and that it indicates to me perhaps stocks have room to advance. That idea was overlooked this week as stocks tumbled despite core PPI that was moderate, a suggestion that housing starts are not decreasing…

ProShares ETF Report - Strongest BUY and SELL Signals

This is the first of what will be a recurring series of posts where I publish the results of running a number of technical analysis screens against all of the ProShares ETFs. Below we have the list of those ETFs with the strongest technical underpinnings as well as a list of those ETFs that are the weakest.

Strongest BUY Signals --

The following chart lists only those ProShares ETFs where both DMI and Aroon evaluation indicates they are in reasonably strong up-trends.

SymbolSignal TypeNameCategory20-Day MA above
50-Day MA
DMIAroonDOGBUYShort Dow30Short Market CapYesDMI: strong trend Up (ADX: 26 +DI: 33 -DI: 11)Strong Up trend - Up: 100 Down: 8 Osc: 92DXDBUYUltraShort Dow30Short Market CapYesDMI: strong trend Up (ADX: 25 +DI: 32 -DI: 11)Strong Up trend - Up: 100 Down: 8 Osc: 92EFUBUYUltraShort MSCI EAFEShort InternationalYesDMI: strong trend Up (ADX: 24 +DI: 39 -DI: 17)Strong Up trend - Up: 100 Down: 8 Osc: 92EFZBUYShort MSCI EAFEShort InternationalYesDMI: strong trend Up (AD…

Alert HQ for the week ending 6-20-2008

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 can only be termed "scary".

The markets took a real tumble this week, down about 3.1%. As can be expected, this is killing the performance of recent stock alerts. More significantly, this week the SELL signals based on daily data greatly outnumber the BUY signals. We have 48 SELL signals, a record quantity for one week for Alert HQ compared to only 11 BUY signals. Perhaps this lopsided situation is a signal in itself.

This week we have produced a small selection of 3 BUY signals as well as 11 SELL signals based on weekly data. As you can see, SELL signals outnumber BUY signals when looking at weekly data also.All in all, for the bulls, this ain't pretty. You may want to use our list of SELL signals to help cut losses if you are not someone who is comfortable shorting stocks…

NII Holdings - still plenty of opportunity

I have written previously on NII Holdings (NIHD) in a post titled "NII Holdings bounces off bottom - can it keep up the momentum?" The company sells Nextel-branded cell phone service in Latin America including Brazil.

The company recently reiterated that it sees no slowdown in sales and the stock responded by continuing to climb.

In an article entitled "1.2 Billion Mobile Subscribers!", eMarketer discusses how cell phone use is growing in the BRIC countries (Brazil, Russia, India and China).

The article says that cell phones are increasingly the primary on-ramp to the Internet for users in these countries. From a marketing standpoint, the Internet companies with solid mobile offerings will benefit. Yahoo! (YHOO) has made a point of focusing on mobile perhaps even more than Google (GOOG) has. We will see the two companies continue their rivalry on cell phones and maybe there will be an opportunity for Yahoo! to gain some ground.

Getting back to NII Holdings, however, th…

Industrial Production - tech propping up the numbers?

The Federal Reserve today reported Industrial Production for May. Production unexpectedly declined 0.2% from the prior month, which was worse than the forecast of a 0.1% increase. Manufacturing output was unchanged in May, the output of utilities shrank 1.8 percent, and the output at mines rose 0.1 percent. Capacity utilization slipped 0.2% to 79.4%.

The following set of graphs comes from the Federal Reserve's web site and show the relationship of high tech manufacturing to industrial production overall.

Take a look at the middle chart, the one that shows percent change year over year. It's interesting to see that the recession in 2000 (gray highlight) and its accompanying brutal bear market in stocks did not see a dip in industrial production as severe as those seen during the 1970's and 1980's recessions.

Looking at the most recent data points in the same chart, it is also interesting to note that without the positive contribution of tech, the percent change in industr…

S&P 500 Weekly Sector Stats, 6-13-2008

Each week we gather some technical analysis statistics on the overall stock market and in particular the S&P 500. This week's post provides some insight into the continued deterioration of the S&P 500 and the performance of the various industry sectors represented in the index.

The following chart is for the week ending June 6, 2008. It gives a breakdown of the industry sectors and the results of running a number of technical indicators on the stocks in each sector.


These stats were captured for a week that ended with a big sell-off on Friday. On the whole, Energy is the strongest sector (no surprise there). Telecom, Utilities and Tech turned in decent performances as well.

This next chart is for the week ending June 13, 2008.


During this week stocks sagged further and then staged a decent rally on Friday. Despite the rally, stocks did not regain much momentum. Now we even see Energy giving ground a bit. In nearly every category we see the percentage of stocks generating bulli…

Can stocks extend Friday's party?

It was another tough week for stocks. As a result of a decent rally on Friday, the more narrowly focused indexes managed to show some strength but the broader market wallowed in weakness. For example, the Dow managed to gain 0.8% this week and the S&P 500 finished unchanged. The NASQDAQ, however, finished the week down 0.8%, the Russell 2000 index of small-caps was down 0.9%. The Russel 3000, which is more representative of the entire U.S. equity market, finished the week down 0.24%

As a result, it seems Friday's strength was centered in a modest selection of large-caps and the broader market continued to suffer or tread water. The narrowness of Friday's advance is borne out by the following market statistics which show stocks in general continuing the downward slide that began several weeks ago.

An overview of the short-term technical picture is presented in the following chart of market statistics collected by our Alert HQ process. Each weekend we scan over 7200 stocks and…

Alert HQ for the week ending 6-13-2008

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.

Despite Friday's rally, there has been a continued deterioration in the market overall. This is reflected in the poor performance of recent stock alerts and the fact that this week the SELL signals based on daily data slightly outnumber the BUY signals.

This week we have again produced a selection of BUY signals based on weekly data. We include all the stocks that have maintained good performance during the last four weeks such that it leads to continued generation of a BUY signal.

Big gap in social networking site audience

Much has been made about the seeming difficulty of monetizing many of the social networking sites like MySpace and Facebook.

I just came across an article that sheds some light on the subject at eMarketer. The article, titled Baby Boomers and Social Networking, describes the results of a study by ExactTarget. The study reveals that the baby boomers are not particularly fond of social networking sites. For example, only 13% of 55 to 64 year-olds used social networking sites.

Why is this important? A bank robber was once asked why he robbed banks. He replied "because that's where the money is." Well, it's the baby boomers who are most affluent compared to the younger cohorts of social networking site users. This is especially true with respect to the youngest users in middle school, high school and college. It is only reasonable to assume that monetization will lag if the segment of the online audience with the most money to spend stays away.

This gap in the audience for …

Ocwen Financial - making the best of hard times

Everyone knows the current environment has been hard on financials, especially those that have any involvement in residential mortgages.

There are a few firms that are managing to use certain company-specific advantages to hold their own and even prosper. Ocwen Financial (OCN) may be one of these.

Background --

Ocwen Financial Corporation is a business process outsourcing provider to the financial services industry, specializing in loan servicing, mortgage fulfillment and receivables management services.

The company currently operates within two lines of business:

Ocwen Asset Management - comprised of the Servicing, Loans and Residuals and Asset Management Vehicles segments

The Servicing segment provides outsourced loan servicing for subprime loans but does not own the loans. Many of the loans are actually securitized and owned by trusts. The Loans and Residuals segment does hold loans for resale. Asset Management Vehicles holds loans as investments and does securitizations.

Ocwen Solutions …

S&P 500 - defensive sectors and energy lead

This post is intended to provide some insight into the deterioration of the S&P 500 and the performance of the various industry sectors represented in the index.

The following chart is for the week ending May 30, 2008. It gives a breakdown of the industry sectors and the results of running a number of technical indicators on the stocks in each sector.

As can be seen, Energy, Telecom, Information Technology and Utilities are the leading sectors with Health Care and Financials bringing up the rear.

This next chart is for the week ending June 6, 2008.

After the past week, Financials take the honors as the absolutely worst performing sector. Consumer Discretionary has also weakened significantly.

It is interesting to note that the Consumer Staples sector actually improved last week. And Utilities and Health Care held their own. These classic defensive sectors showing strength indicate how worried investors were last week.

Energy continues to be the leading sector and why not, with the price…

Oil jumps while the stock market slides down the drain

What a week! Can you spell O-I-L?

Things started out OK. We had another series of economic reports that came in slightly better than consensus estimates. Unfortunately, every week ends with Friday and this Friday was not kind to investors. The May employment report hit and payrolls showed another modest decline though not as bad as expected. The headline unemployment rate, however, jumped from 5.0% to 5.5%, the largest jump in years. Analysts felt that this was explained by an influx of college and high school students just hitting the job market rather than a large decrease in unemployment. Nevertheless, it set a negative tone in trading for the day.

The other bomb that dropped on Friday was the total craziness in the oil market. Crude prices jumped $10 and triggered circuit breakers. The climb in prices resumed, however, and oil ended the day up 8.4%, setting a new all-time record at $138.45. The higher oil climbed, the further the stock market plunged. Aggravating the situation was …

Alert HQ for the week ending June 6, 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 took a real beating this week at the hands of oil and a surprising unemployment number didn't help either. This makes three weeks of declining performance in the Dow and the S&P 500 with only the NASDAQ managing to tread water. Friday provided the indignity of the Dow dropping almost 400 points as oil hit a new record and investors tried to make sense of the unexpected spike in the unemployment number. Against this tough backdrop, stocks that generated past TradeRadar stock signals, like most stocks out there, are definitely running into headwinds. This week Alert HQ is split 50-50 between BUY signals and SELL signals with 8 of each.

Looking back --

Here are a couple of examples of BUY signals from last week's TradeRadar Alert List and the gains they…

TradeRadar portfolio - June review

I have been writing about the TradeRadar software on a regular basis lately but I have not spent much time discussing my results using the software.

The Track Profit & Loss page of the TradeRadar site shows the results for the stocks that are in our trading portfolio. Note that the ETFs were not chosen using the TradeRadar software but all the stocks were.

The good news is that all but one of the stocks (and one ETF) are, as of today, showing gains. Obviously some have done better than others. All of these stocks have, at one time or another, shown up in an alert list from the Alert HQ process where we scan almost all the stocks on the NYSE, the AMEX and the NASDAQ every weekend looking for BUY and SELL signals.

Having used Alert HQ to weed through all the stocks in the general market and provide a short list of investment candidates for the week, I then had to evaluate each one in turn to determine which ones to actually buy. This is easier said than done and it is why I have starte…

Are semiconductor shipments a leading indicator of tech strength?

In looking at the recent Durable Goods report at http://www.economicindicators.gov/ it was striking to see that shipments for semiconductors were up over 25% from March to April.

Given that electronics manufacturers need to acquire semiconductors before they can assemble and ship their products, it is reasonable to assume that semiconductor shipments are a leading indicator of electronics manufacturing. To be more precise, semiconductor shipments would be a leading indicator of electronics manufacturing sales expectations.

On the surface, the 25% increase in semiconductor shipments appears to be very bullish. April 2008 shipments compared to April 2007 shipments, however, show a drop of more than 13.5% year-over-year. On a year-to-date basis, semiconductor shipments show a 7.9% drop in 2008 compared to 2007.

Looking at the year-to-date numbers for shipments for the other components of the Computers and Electronic Products sector, we see that there have been small percentage increases for…

S&P 500 - sector analysis shows more room for gains

In the process of scanning all the stocks on the NYSE, the AMEX and the NASDAQ this weekend, we have gathered the results of technical analysis on the stocks that comprise the S&P 500. The data is summarized in the following table.

S&P 500
Industry SectorAroon - UP Trend% Aroon UP TrendDMI - UP Trend% DMI - UP Trend20-day MA above 50-day MA% 20-day MA above 50-day MATotal Stocks in SectorConsumer Discretionary2934%1720%4552%86Consumer Staples1845%1230%2460%40Energy3289%1850%3392%36Financials1618%1112%4448%91Health Care2038%917%2548%52Industrials2850%2646%4377%56Information Technology4361%3448%6085%71