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Showing posts from July, 2008

On the road...

For those who follow my scribblings on this site, I wanted to let you know that I will be traveling for a few days and there will be no new posts until the weekend.

The remainder of the week looks to be pretty interesting in the stock market and in the oil patch but I will be focusing more on family and the New York Yankees.

Yang almost gets it right

Jerry Yang has taken a lot of heat for rebuffing Microsoft and and Carl Icahn. He has been repeatedly called on the carpet for not looking out for the interests of shareholders.

The attitude of many critics is that it is management's sole responsibility to deliver cash to shareholders and that any buyout offer for a reasonable amount of money is good enough.

Yang claimed that Microsoft was undervaluing Yahoo! and held out for a higher price. Thus began the volleys back and forth between the two companies as talks broke down and started up again and alternative deals were proposed. Then Icahn jumped in, fresh from the debacle at Motorola, thinking that all he had to do was show up and Yahoo! would capitulate to Ballmer.

Yang was right to fend off these two.

Ballmer proposing to buy just the search business of Yahoo! as a variation of the original deal illustrates how clueless he is. Google is the dominant player in search and delivers by far the best search experience. Google is also t…

ProShares ETF Report - strongest BUY and SELL signals, 7-25-08

About one month ago I provided a list of the ProShares ETFs that were generating the strongest BUY signals and the strongest SELL signals (use this link to read that post). At that time, the BUY list was dominated by the UltraShort ETFs and it was a picture of a market in trouble. Most sectors and market-caps were represented.

We ran the scan again this week and the results were quite different. Below we have the list of those ProShares 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. This is confirmed by the fact that these ETFs are trading with their 20-day moving average above their 50-day moving average.

SymbolNameCategory20-day MA above 50-day MADMIAroonDUGUltraShort Oil & GasShort SectorYesDMI: strong trend Up (ADX: 30+DI: 32-DI: 10)Strong Up trend -Up: 96Do…

Weekly review - small-caps lead the way but red flags remain

If you only look at the Dow or the S&P 500, one might be tempted to say that stocks didn't do much this week. In actuality, there was a lot of movement in the broader market.

This week saw a divergence between the large-cap stock indexes and the small cap indexes. The Dow finished down 1.1% and the S&P 500 finished down 0.2%. This is in contrast to the NASDAQ which finished up 1.2% and the Russell 2000 which finished up a big 2.5%.

Events that moved markets this week included further drops in the price of oil, bad earnings reports from Ford and American Express and weak housing data. Many stocks are beating what are turning out to be extremely pessimistic earnings estimates. For the majority of companies, however, forward guidance has been cautious which has, in some cases, driven sell-offs.

Against this backdrop, many stocks were able to continue the momentum of the previous week's rally but red flags remain. Our technical analysis of the market follows.

Looking at daily …

Alert HQ for the week ending 7-25-2008

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. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move.

After a big rally in the previous week, this week saw mixed results. The Dow and the S&P 500 ended a bit below the previous week's close, the NASDAQ and the Russell 2000 nicely above.

This week's action saw stocks continue to advance sufficiently to begin triggering numerous BUY signals. What a list we have this week! Based on daily data we have 146 BUY signals and only 5 SELL signals. This is the most lopsided I have seen these numbers since we began running the Alert HQ process.

Before getting too excited, though, it is useful to step back and look at the signals based on weekly data. Here, the situation isn't nearly so giddy: 20 BUY signals and 23 SELL signals.

M…

Bond market looks vulnerable - two ProShares ETFs to play the move

"The cycle repeats viciously
While I smile outwardly"

-- Bracken Courage from the song The Cycle

When it comes to the ProShares ETFs, most of the attention is devoted to the ones that track various stock-related indexes such as the Dow, NASDAQ, S&P 500, Russell 2000 as well as a number popular sector indexes such as financials, REITs, tech, etc. Lately, the ETFs that track oil are getting some action, too.

What many individual investors may be missing is that the bond market, in particular the Treasuries, is not doing especially well. And ProShares offers a way to take advantage.

Bond market fundamentals --

There are several reasons for the situation in the bond market.

The one that most investors are worrying about is inflation. Bonds typically decline in price as inflation increases or as the perception of impending inflation increases. This is because investors know that the typical Fed response to inflation is raising interest rates. This implies that bonds issued in the fu…

Taiwan Semiconductor - today's pullback a buying opportunity?

Taiwan Semiconductor (TSM) fell over 4% today, more or less in sympathy with the drop in large-cap semiconductor stocks instigated by the poor showings of Texas Instruments (TI) and SanDisk (SNDK).

There may indeed be some near-term pressure on TSM but looking longer term, the company is benefiting, and in the future will increasingly benefit, from the "go fabless" trend in the semiconductor industry.

What "going fabless" means is that a semiconductor company outsources the manufacturing of the physical chips while maintaining the intellectual property of the chip designs in house.

This approach has two major benefits:
Paying for a semiconductor foundry is not necessary. This can save the semiconductor company several billion dollars in capital investment.Since a foundry does not need to be built from scratch, the semiconductor company enjoys faster time to market.These benefits can be useful to mature companies but in these days can be crucial for a semiconductor star…

ProShares - this week's link list

As I strive to be the prime source for information and commentary on the ProShares family of ETFs, I thought I should widen the net to pull in blog posts from other financial writers.

This post is the first to contain a list of links, a "linkfest" as Barry Ritholtz would say. To my surprise, it is a little more difficult than I expected to find posts on the ProShares ETFs.

The following list is comprised of posts that appeared on Seeking Alpha over the course of the last week or so:

Stock Markets Nearing Important BottomAggresive Investors Should Ante Up with ProShares Ultra Financial ETFETF Update: Focus on HealthFive Strategies to Survive the MarketsShort Oil as a Long InvestmentProtecting Your Wealth and Profit During the 2008 CrashNotes on a Schizophrenic Market WeekETF Pick of the Week: ProShares UltraShort Oil &GasWhy It's Time to Invest in Domestic BanksJune Best Month for Short Selling in 7 YearsThe S&P 500 Hits the 1200 Target. Now Wha…

S&P 500 - weekly sector analysis: caution is the word

"Caution is not cowardly. Carelessness is not courage" -- Unknown source

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 sector rotation going on in the S&P 500 and details the performance of the various industry sectors represented in the index.

The following chart is for the week ending July 11, 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.


This next chart is for the week ending July 11, 2008. We'll discuss some of the differences below.


The most marked change is in the Energy sector. The last few weeks have seen a real change in the trends for most of the stocks in this sector. Looking at the chart above, we see the sector has fallen to the weakest state it has been in in months. Both Aroon and DMI analysis indicate that no stocks in the sector are curren…

Traders might like this market; investors, not so much

This past week started off with more of the same: selling of everything and especially the financials. Wednesday, that all turned around as the market began a surprisingly strong two day rally.

Strength came from the financials in an unlikely turnaround in investor sentiment toward this downtrodden sector. On Wednesday, Wells Fargo reported earnings. Though down from the previous year's quarter, the company was nevertheless profitable and even increased their dividend. Weary investors took this as a sign that all was well with the banks and began buying financials like crazy. Added to the mix was the announcement that the SEC was prohibiting the use of naked shorts when shorting a list of selected financial stocks. Everyone held their breath waiting for Citi to report on Friday. Investors sighed with relief when Citi announced losses not as awful as had been feared.

Against this backdrop, investors decided to embrace the concept of demand destruction in the oil markets. No one wond…

Alert HQ for the week ending 7-18-2008

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.

Stocks staged a strong rally this week led by financials of all things! All the major indexes showed respectable gains as earnings season is turning out to be decent despite some mixed results in the Tech sector.

Oil dropped a significant amount this week and that accelerated the rotation we had seen from energy stocks to other sectors and provided another big boost to the stock market.

As a result of all these positive feelings running rampant through the markets, we have a big change in what we are seeing in the TradeRadar daily signals. For the first time in weeks we have more BUY signals than SELL signals. We actually have 65 BUY signals and only 31 SELL signals based on daily data. Unfortunately, the signals based on weekly have not been so quick to turn around. We have only 7 BUY signals and 22 SELL signal…

Does change in ProShares BUY signals indicate sector rotation?

Sometimes it is as instructive to see what sectors are out of favor as it is to see what sectors are in favor.

Recently we posted a list of the strongest BUY and SELL signals found in the family of ProShares ETFs. This earlier post found mostly inverse ETFs generating the strongest BUY signals. This was interpreted as a display of a very negative outlook on the stock market as nearly every sector was represented.

The following list shows those ETFs which, over the last two weeks, have fallen off the earlier list of strong BUY signals

FXPUltraShort FTSE/Xinhua China 25Short InternationalRXLUltra Health CareUltra SectorSMNUltraShort Basic MaterialsShort SectorSZKUltraShort Consumer GoodsShort SectorSJHUltraShort Russell2000 ValueShort StyleSKKUltraShort Russell2000 GrowthShort StyleSRSUltraShort Real EstateShort SectorSSGUltraShort SemiconductorsShort Sector
The fact that the UltraShort funds are falling off the BUY list indicates that those sectors are at least showing some improvement…

More trouble in store for OmniVision?

OmniVision (OVTI) is a California semiconductor company that makes solid state image sensor devices, or camera chips, for cell phones and other consumer products. Though design is carried out in the United States, chip fabrication occurs in Taiwan.

DigiTimes has reported news of "CMOS image sensor supplier OmniVision planning on reducing its order volumes to Taiwan Semiconductor Manufacturing Company (TSMC) in the third quarter". Instead of increasing orders by 10% it will reduce orders by 10%.

A weakening in the handset market is said to be the cause of the reduction in orders. OmniVision apparently increased inventory too rapidly based on overly optimistic expectations for cell phone orders.

This comes after the company disappointed investors last quarter, missing analyst expectations for both sales and earnings. In the company's fiscal fourth quarter ending in April, sales fell 25%. EPS came in at $0.27, shy of analyst estimates of $0.32. The stock has fallen from over $…

Why is large cap value underperforming?

Today I did a comparison of value versus growth funds using the ProShares family of ETFs. ProShares provides a selection of Ultra-long ETFs as follows:

Ultra Russell 1000 Value (UVG)
Ultra Russell 1000 Growth (UKF)
Ultra Russell MidCap Value (UVU)
Ultra Russell MidCap Growth (UKW)
Ultra Russell 2000 Value (UVT)
Ultra Russell 2000 Growth (UKK)
They also provide a selection of Ultra Short ETFs as follows:

UltraShort Russell 1000 Value (SJF)
UltraShort Russell 1000 Growth (SFK)
UltraShort Russell MidCap Value (SJL)
UltraShort Russell MidCap Growth (SDK)
UltraShort Russell 2000 Value (SJH)
UltraShort Russell 2000 Growth (SKK)
Looking at the relative performance of the Ultra Long ETFs, it is clear that large cap value is underperforming by a wide margin. The following chart shows how UVG, the Ultra Russell 1000 Value ETF, is doing significantly worse than the other ETFs.


In looking at the constituent holdings of the Ultra Russell 1000 Value (UVG) ETF, we see that the ETF contains lots of financial stocks…

Part 2 - Time to get conservative with your 401K

Back in January when the market was going through its first set of gyrations and hitting a serious low I wrote a post titled "Time to get conservative with your 401K".

In that post I suggested that, in the interest of preserving capital, it might be a good idea to move approximately half of your 401K holdings into a stable value fund. It's true, this does have an element of market timing. On the other hand, there is nothing wrong with being defensive when it is clear that the market is in a serious downtrend. In fact, the post was somewhat inspired by the writing of Random Roger who advises that investors avoid allowing their portfolios to go "down a lot" though "down a little" is probably unavoidable in a down market.

With the Fed and the Treasury moving to support Fannie Mae and Freddie Mac, it is time to discuss this strategy again. At the time of the original post, there was a debate about the nature of the holdings of stable value funds. The funds …

The market hesitates - too soon to call the bottom?

It was all about Fannie, Freddie and oil this past week. The major indexes dropped but we saw a small glimmer of strength in the broad market.

A rumor driven market --

Financials again took it on the chin as rumors swirled about Fannie Mae and Freddie Mac facing insolvency, government bailouts, Fed intervention, etc. As the financials go, so go the Dow and the S&P 500 and to a lesser extent, the rest of the market.

Oil dropped earlier in the week only to rise to a new intra-day record after more rumors about conflict with Iran and Israel's willingness to stage a preemptive attack on Iran's nuclear facilities. Political disturbances in Nigeria also contributed to oil's resurgence. Against this background, gold also rose solidly on the week.

Tech stocks were hit by a downbeat assessment on the technology environment delivered by a Cisco's John Chambers. A positive statement from Intel only helped a little to dispel the gloom settling over tech.

In spite of all this, it wa…

Alert HQ for the week ending 7-11-2008

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 market action showed that wherever the financials are, indexes go down. The Dow and the S&P 500 showed 1.7% and 1.9% declines. Financials make up a significant percentage of those indexes even though their weight has been reduced compared to other sectors. Where the financials do not predominate, indexes actually saw some gains or at least a very small loss: Midcap 400 up 0.1%, Russell 2000 up 1.4% and the NASDAQ down only 0.3% on the week.

Nevertheless, it is a tough market for holding stocks. With rumors swirling around Fannie Mae and Freddie Mac, investors have been especially skittish. As a result, markets have traded in wide ranges each day. Throw Iran/Israel and the price of oil into the mix and you have the makings of a spicy stew indeed.

As I have been saying for weeks now, the market…

ProShares Financial ETFs versus Real Estate ETFs - which should you own?

In looking at the constituent holdings of the ProShares Ultra Financials ETF (UYG) I noticed that there seemed to be a good number of REITS included.

To investigate further, I took the holdings of the ProShares Ultra Real Estate ETF (URE) and did a direct compare to the holdings of UYG.

To my surprise, every single one of the holdings in the Ultra Real Estate ETF, comprising a variety of 80 different REITs, was also included in the Ultra Financials.

Relative performance --

It is interesting to see how real estate underperformed the combined financials until March of 2008 when the situation turned around and financials became the one that underperformed.



In the first part of the chart, you can see URE begin to weaken as the news about troubles in the real estate sector began to take a toll. During this time, the idea that the problems in real estate wouldn't spill over into the rest of the financial sector or the general economy was still in vogue. By last October reality began to set i…

Options or ETFs - which is better for the individual investor?

It is generally agreed that the ProShares long/short and ultra-long/ultra-short ETFs are good vehicles for both hedging and short term trading.

One voice of dissent is from those who are adept at trading options. Their point is that options are cheaper and can provide more leverage. The variety of option strategies (puts, calls, butterflies, straddles, buy/write, LEAPs, etc.) can provide more flexibility. There are also a much larger number of stocks, each with an associated options chain, to choose from while there are only 64 ProShares ETFs, for example, currently on the market.

For the individual investor, though, the ease of use derived from the ETF approach may outweigh the benefits of using options. In the case of the ETF, an investor does not need to choose an expiration date or a strike price.

Now that ProShares has expanded their offerings with ultra-long/ultra-short sector ETFs in addition to the ETFs that track major market averages, investors now have the choice of choosing n…

Solar wafer prices on the rise again?

When considering solar stocks, the conversation always turns to the cost of silicon and solar wafers, the raw materials that go into solar cells and photovoltaic solar panels.

For some time now, the industry has suffered a shortage in silicon. This has driven up prices and led to PV panel manufacturers implementing long-term contracts to assure adequate supply in the future.

Many have thought that with new silicon suppliers coming online the shortage would soon ease and prices would begin to come down.

An article today in Digitimes suggests that the price optimists are a little ahead of themselves. To quote the article:

"Solar silicon wafer suppliers Sino-American Silicon Products (SAS) and Green Energy Technology are considering raising their contract manufacturing quotes soon because of rising production costs..."

What is driving the rise in prices? The increased prices "reflect the rising costs of materials - such as steel wire -and electricity which has been driven up by…

ProShares ETFs fail to track NASDAQ properly today - is this rally meaningful?

Some numbers to consider from today's trading:

NASDAQ Composite up 2.28%
NASDAQ 100 ($NDX) up 2.43%
PowerShares QQQ (QQQQ) up 2.38%

ProShares has a couple of ETFs that track the NASDAQ 100 on the long side and on the short side. One would have expected the double long ETF to move up nearly 5% and the double short ETF would have moved down nearly 5%.

What we saw instead is the following:

ProShares Ultra QQQ (QID) up 3.54%
ProShares Ultra-Short QQQ (QID) down 3.74%

Does this mean that ProShares was not able to deliver the expected returns and failed to track their underlying indexes properly? Or does it mean that investors did not completely buy into today's rally in the NASDAQ and, as a result, did not sell off the ultra-short ETF or bid up the ultra-long ETF as much as expected?

I see this happen periodically. Is it a tell? Is it an indication we can't trust today's rally? Stayed tuned.

Strongest Technical Performance in ProShares ETFs --

In the meantime, what can we deduce from …