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Showing posts from October, 2008

A cold Christmas for on-line retailers?

The Tech Trader Daily site had a post today that nicely laid out the slide in e-commerce sales growth this year on a month-by-month basis. The data comes from Comscore and looks like this:
April: +15%May +12% June: +11% July +8% August: +6% September: +5%Clearly, it's not a pretty picture; especially for an industry that is used to growing at double digits.

What about the all-important Christmas shopping season? Will e-tailers be able to show enough growth to overcome the weakness in the months leading up to the holidays?

Don't count on it.

As the evidence increases that consumers in general are reluctant to spend, estimates for the holidays are coming down.

Despite the fact that the percentage of shoppers using the Internet continues to increase, it appears we are hitting a speed bump.

The following chart is from eMarketer and it shows that growth in holiday online sales will be the weakest in years.


The folks at eMarketer are expecting a mere 10% growth over 2007. T…

ProShares ETF Links - the list for Oct, 30, 2008

Today we have another list of links to posts by other bloggers that are writing about ProShares ETFs. As usual, this week's list is comprised mostly of posts from Seeking Alpha. I recommend that you click through to the authors own sites after reading these posts on the Seeking Alpha site.


Thu, Oct 30DXD
Options Trader: Thursday Outlook at Seeking AlphaThu, Oct 30DIG
DUG
Really Diggin' DIG at Seeking AlphaWed, Oct 29SKF
UYG
Three Areas of Opportunity for the Bold at Seeking AlphaWed, Oct 29FXP
QLD
Options Trader: Wednesday Outlook at Seeking AlphaWed, Oct 29SKF
Can Capital Expansion and Fed Action Co-exist? at Seeking AlphaTue, Oct 28TBT
Markets/Irrational/Longer/Solvent at Seeking AlphaMon, Oct 27USD
Six Months, 17 Metrics: A Week by Week View at Seeking AlphaMon, Oct 27SSO
The Power of the RSI at Seeking AlphaSun, Oct 26SSO
Leveraged ETFs: Not For Long Term Investors at Seeking AlphaFri, Oct 24DUG
OPEC's Cuts Can't Fight Global Recession Headwinds at Seeking AlphaFri, Oct 24DXD
Opt…

Durable goods report reveals more tech weakness

The US Census Bureau just released the advance Durable Goods report for September.

It shows that the tech sector took another beating.

At a summary level of Computers and Electronic Products, Shipments were down sequentially 2.1% and New Orders were down 1.4%. This was after a terrible August number where shipments were down 5.6%; therefore, we are seeing further declines in September from an already bad number.

Looking at the sub-categories, first up we have Computers and Related Products. In this sector we see Shipments were finally up slightly at 0.8% after two bad months in a row but New Orders were down 2.1%. Given that New Orders were down 13.1% in July and up only 0.7% in August, we again have further deterioration from a prior run of bad numbers.

We have mixed results in the Communications sector where a 2.6% gain in Shipments was recorded while a big 14.6% drop in New Orders was registered.

Finally, we have Semiconductors. New Orders are not tracked in this sector but Shipments ar…

Could automakers take same route as airlines?

When the going gets tough in a particular industry, the companies involved go to the government. When competitiveness has been lost, the non-competitive want to dump their pension plans.

This means they march to the Pension Benefit Guaranty Corporation, known as the PBGC.

Back around 2002 it was the steel industry. The following companies went to the PBGC to unload their pension plan responsibilities: Bethlehem Steel (one of the biggest plans to be terminated), National Steel, Northwestern Steel and Wire, Weirton Steel, Kaiser Steel and more. Many of these companies declared bankruptcy and shut down plants. Whatever was still valuable was sold off or merged into the remaining bigger, stronger steel companies that were still standing.

More recently, the airlines pulled a similar move: United Airlines, TWA, Aloha Airlines and US Airways all terminated their plans and turned them over to the PBGC. The difference in this case is that some of the companies had no intention of closing their do…

Weekly Review - is the cup half full or half empty?

Questions of the day: Is the cup half full or half empty? Have we hit the bottom or is there more pain in store? Should we buy or sell?

This past week saw continued improvements in the credit market with Libor declining and slight glimmers of activity in commercial paper now that the Fed is backstopping that market, too.

Commodity prices fell again. For those who are inclined to the optimistic side, this is good news for consumers. For those inclined to be pessimistic, this is a further signal of demand destruction and another indicator of how long and deep the recession will be.

Earnings season proceeds apace. Optimists point to the greater than expected number of companies that are beating analyst expectations. Pessimists point to the almost uniform negativity of forward guidance provided by nearly every company and the increasingly common announcements of job cuts.

Further evidence that decoupling is a myth was provided when the UK reported a 0.5% decline in their third quarter GDP, fo…

Free Stock Alerts - Alert HQ for Oct 24, 2008

This post is to announce that the latest list of free 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. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

This week, major indexes gave up more than they had gained in the previous week. Concerns over global recession hit markets worldwide and the U.S. was sucked into the vortex like everyone else. To my surprise, we didn't even get the dead cat bounce that I was expecting; investors just continued to drive the markets down. As can be expected, against this very negative backdrop we have few BUY signals. We also see that the number of SELL signals is decreasing as so many stocks have already rolled over to the downside. Here is the breakdown for this week:
based on …

Who will the leaders be when the next bull market begins?

Merrill Lynch just released their latest installment of the RIC Report, the periodic update from their Research Investment Committee led by well known investment strategist Richard Bernstein.

Among other things, the report makes the point that "extreme volatility always signals a change in leadership". We are certainly seeing extreme volatility these days with the VIX hitting records left and right.

To determine who the new leaders will be, it is necessary to identify who the former leaders were and why they attained leadership. The RIC Report specifies the following:
Our theme continues to be that every growth story of the past 5-10 years has been based on the credit bubble. Whether it is China, Emerging Market infrastructure, energy, commodities, residential real estate, hedge funds, or private equity funds, the similarity they all share is that they are extremely capital or credit intensive and had easy access to cheap capital.

The days of easy access to cheap capital are ove…

From worried bear to cautious bull?

Credit markets are showing glimmers of improvement. Note the following quotes from MarketWatch.com:
The cost of short-term dollar loans dropped more than expected Monday, a signal that money markets are slowly returning to normal after threatening to derail the global financial system earlier this month, economists said.

The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.05875%, down sharply from 4.41875% on Friday. The one-month rate fell to 3.75125% from 4.18125% on Friday.

Later Monday, U.S. Federal Reserve Chairman Ben Bernanke, in testimony prepared for delivery at a hearing before the House Budget Committee, said he was encouraged by signs a severe credit blockage was easing after massive efforts by governments around the world to recapitalize major banks and guarantee short-term bank debts.

On Friday, three-month Libor posted its first weekly decline since July. The rate had pushed as high as 4.81875% on Oct. 10.
In yesterday's Weekly Review post

Weekly Review - the slide slows as stocks rise

Yes, craziness and volatility are now the norm.

Monday saw an absolutely massive rally, one for the record books. Wednesday saw a huge drop such that traders, after the fact, noted that the market had crashed again. Yet the Dow and the S&P 500 managed to finish the week up well over over 4% and the Nasdaq finished up 3.7%.

It is clear that Monday was a snap-back rally after the worst week the market had seen since the 1930's. Subsequently, the Treasury and the Fed announced that they would take direct equity stakes in banks, providing a capital injection in the process. This allowed stocks to more or less hold their gains from Monday.

On Wednesday, a number of economic reports came out that confirmed the bears worst expectations. Most notably, retail sales declined 1.2%, the worst seen in years. The Fed Beige book provided a consistent picture of slowing economic activity in all districts. The Philadelphia Fed registered a much larger drop than expected. Rumors of forced selling …

Buffet says buy stocks, what should you do?

Friday, Warren Buffet wrote an op-ed piece in the Wall Street Journal saying he was buying stocks for his personal portfolio. Some say this was a major reason why markets rose on Friday though they fell back to a modest loss by the end of the day.

Buffet made the point that stocks are now cheap and that he likes to buy when everyone else is fearful. The Wall Street Journal followed up with an article that looked at several measures that are commonly used to divine whether stocks are over-valued, fair-valued or under-valued. They provided the following graphic titled "The World is Cheap".

As can be seen in the three charts above, these indicators have fallen to levels not seen since the 1980's. In all three charts, the lower the reading, the more stocks can be considered to be under-valued. The article referenced at the bottom of this post provides a bit more detail on each chart.

And a few more charts won't hurt --

Well, there is plenty of evidence that stocks are getti…

Free Stock Alerts - Alert HQ for Oct 17, 2008

This post is to announce that the latest list of free 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. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

The market showed huge price swings this week but no new 52-week lows were established (whew!). Indeed, the Dow closed the week with a 4.7% gain, the S&P 500 with a 4.6% gain and the NASDAQ with a 3.7% gain. Small and mid-caps, however, barely budged. Against this backdrop, we have mixed results. Here is the breakdown for this week:
based on daily data, we have 25 BUY signals and only 4 SELL signals
based on weekly data, we have 2 BUY signals and 99 SELL signals
Last week we had absolutely no BUY signals based on daily data so it is good to see some BUYs appear an…

10 ways tech gets hurt by the consumer slowdown

As expected, the retail sales numbers released today were indeed horrible. What does that mean for the tech sector?
First, how bad were the retail sales numbers? According to the Census Bureau retail sales report for September, estimated monthly sales for retail and food services on a seasonally adjusted basis fell 1.2% last month from the previous month. This is the biggest monthly percentage decline in more than three years. It is also represents a 1% drop from September 2007.

According to the New York Times, MasterCard reported last week that spending on consumer electronics and home appliances dropped 13.8 percent in September compared with a year ago. That number is by far the largest recorded since MasterCard began tracking the category in 2003, and twice the largest previous monthly drop in such spending.

Given that consumer spending accounts for 70 percent or more of economic growth, the tech sector cannot escape the impact. And based in the MasterCard report, consumer electronic…

Garnter and Sun's Schwartz on different planets

Gartner is hosting their Symposium/ITxpo 2008 conference in Orlando this week. From Peter Sondergaard, Gartner's global head of research, comes the money quote:
"The next big thing in IT is not a technology — it is cost reduction, risk management and compliance"Garnter goes on to say that information technology spending could rise only 2.3 percent in 2009. Gartner had previously forecast 5.8 percent growth in IT spending next year. Developed economies are expected to get the worst of it, especially the United States and Western Europe, but emerging regions will not be immune either.

For Europe, Gartner is now predicting a slowdown of 0.8% where it was previously looking for 2.3% growth. In North America, they are expecting growth to remain barely positive at a 0.5% rate, down from the previous prediction for 5.3% growth.

Echoing some of the themes we previously wrote about in our post "10 ways the financial meltdown impacts tech", Gartner offers several recommenda…

Lightening up on my ultra shorts

The market certainly swung through a wide range on Friday. The first half hour showed more variation than is often seen over the course of an entire day.

The S&P 500 opened with a big gap and fell 7%. Forty minutes later it had closed the gap and moved into the green. The market then proceeded to sink in a fairly steady and orderly way down to nearly its earlier lows until 3:00 when the index turned up and began to rally like crazy. By 3:36, it had erased its loss and was up 2.5%. The index then turned down and closed with a 1.18% loss.

I relate this intra-day behavior to illustrate why I got the impression that Friday was some kind of climactic day. Maybe not "the" climactic day denoting the absolute bottom but at least some kind of tradable bottom. The whipsaw action seemed to signal a change of trend might be in the air.

As a result, by mid-day I sold half of my positions in the ProShares Ultra Short Midcap 400 ETF (MZZ) and the Ultra Short QQQ (QID).

The Ultra Short Fina…

Weekly Review - the beatings continue

A stunning week and thank goodness it's over! Records were set on the downside with major averages sliding 18% over the course of five tumultuous sessions. Over the course of the last two weeks, we essentially met the definition of "crash" - a more than 20% drop in a short period of time. Selling was relentless all week long with only the NASDAQ Composite managing to close in positive territory by a few points on Friday.

As an indication of how pessimistic investors were this week, you have to realize that this selling took place despite the unprecedented coordinated global rate cut, decent earnings and forward guidance from bellwethers IBM and GE and commitments by the U.S. government to backstop commercial paper.

The short selling ban expired at midnight on Wednesday yet financial stocks rallied on Friday. Go figure.

All in all, it was a good week to be short or in cash. Investors focused not only on the continuing problems in the credit markets but also on accelerating …

Free Stock Alerts - Alert HQ for Oct 10, 2008

This post is to announce that the latest list of free 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. Our goal is to identify those stocks undergoing reversals, either to the upside or to the downside.

It was a horrible week in the markets with declines in major averages ranging from 15% to 18%. Damage to our Alert HQ technical indicators continued and and we have hit all time lows. Against this backdrop, we see SELL signals way outnumbering BUY signals again. Here is the breakdown for this week:
based on daily data, we have no BUY signals at all (!) and 19 SELL signals
based on weekly data, we have 3 BUY signals and 188 SELL signals
The BUY lists are practically empty. The SELL list based on daily data actually is smaller than last week because so many stocks had already fall…

Ban on short sales set to end - what next?

On October 1, 2008, the Securities and Exchange Commission extended its emergency action prohibiting short sales of shares of certain financial companies to the third business day after the enactment of the pending federal legislation to stabilize the credit markets and financial system, but not later than October 17. The legislation, better known as the bailout bill, was passed on Friday, October 3 and immediately signed into law by President Bush.

The day after the ban was first announced, the ProShares UltraShort Financial ETF (SKF) was halted and when it resumed trading it barely budged. In the meantime, financials tumbled and many holders of SKF missed out on a 16% gain that day.

Since then, SKF has been trading reasonably in tune with the double inverse of the Dow Jones Financial Index (also the basis for the iShares Financial ETF - IYF). Despite, the ban on short selling, most of the stocks protected by the ban have fallen anyway.

ProShares has announced that October 9, 2008, it w…

401k keeping you awake at night? Me too...

In looking at the logs for this blog I see that many people are visiting TradeRadar because they are searching on the term "401k".

I have written a few posts (see the list at the end of this post) describing my approach to dealing with your 401k during this time of sinking markets.

It is clear that anxiety is rising as fast as markets are dropping. I had remained fairly calm for the last eight to ten months, with a little over half of my 401k funds spread across a stable value fund, a Treasury bond fund and a global bond fund. I have continued to contribute and allocate nearly all of the contributions to stocks on the assumption that I am purchasing good mutual funds at cheaper and cheaper prices.

As the markets have gone from bad to worse to total carnage, it is unsettling in the extreme. Like many of those who are typing "401k" into Google, I am also a working stiff who is worried about his retirement. As someone who closely follows the markets and writes about inve…

Citi: consumer down and out, economy, too

Periodically Citi releases their report entitled "Comments on Credit". This issue is particularly pessimistic.

The report features the Citi Financial Conditions Index (FCI), a proprietary index that is a composite of a number of financial measures. The index is a weighted-average of six variables, including option-adjusted corporate credit spreads, equity values, the money stock, the trade-weighted dollar, mortgage rates and energy prices. It is stated in terms of standard deviations from a mean value. A reading of plus one sigma, for example, would suggest financial conditions are imparting a strong tailwind to aggregate demand that could promote inflationary imbalances and therefore may be a signal that monetary policy is overly accommodative. A reading of minus one sigma is suggestive of financial drag on the outlook that may point to undesirable slowing and rising unemployment.

So where does the index stand today? Here is the money quote from the report:
"At more than …

Weekly Review - keep bailing, this market is sinking fast

Another week for the record books. Congress failed to pass a bailout bill on Monday and the market registered historic losses with the Dow down over 700 points. On Friday, Congress succeeded in passing the bailout bill and guess what? Markets sank anyway. Maybe if the government keeps on passing bailout plans, one of these times we will get a rally.

Well, it really wasn't that surprising to see stocks fall on Friday. With lackluster ISM Services numbers being released a few days after an unexpectedly bad ISM Manufacturing report and then a surprisingly bad Non-farm Payrolls report to cap off the week, there were sufficient reasons of a fundamental nature to cause investors to sell.

If you didn't think those employment numbers were awful and might not have nasty implications for the economy, just look at the following chart (courtesy of the Bureau of Labor Statistics).

Each week our Alert HQ process scans over 7200 stocks and ETFs and records their technical characteristics. Prima…

Free Stock Alerts - Alert HQ for Oct 3, 2008

This post is to announce that the latest list of free 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. Our goal is to identify those stocks undergoing reversals, either to the upside or to the downside.

This week I have added another indicator to the combination that we use. I have brought MACD, Moving Average Convergence Divergence, into the mix. This indicator measures the difference between the 12-day exponential moving average and the 26-day exponential moving average. This difference is MACD. In turn, MACD is filtered using a 9-day exponential moving average. The difference between MACD and its 9-day EMA is called the Divergence.

As an example of how to use the indicator, if you are looking for a BUY signal, you would want to see MACD greater than zero and the Divergence…

10 ways the financial meltdown impacts tech

Can the problems impacting the financial sector impact technology companies? You bet they can!

We know there is a credit crunch and that the economy is slowing. This is translating into falling revenues and a drop in new orders. Tech company management is hunkering down. So are consumers. IT budgets are stagnant or falling and cost cutting will be the order of the day. Below we look at some specific ways that the tech sector will be reacting to this situation.

Surprisingly, there are some impacts that may turn out to be net positive for certain tech companies. As expected, though, there are also some seriously negative impacts.

Positive Impacts --

1. Increase in cloud computing - companies may look to avoid buying data center equipment and will instead look for a "pay-as-you-go" model. Beneficiaries Amazon (AMZN), Google (GOOG), eventually Microsoft (MSFT)

2. Increase in usage of open source products - generally cheaper to acquire and implement than the licensed products from ven…