the Trade-Radar + TradingStockAlerts blog

The Durable Goods report for November was released on December 27 and markets were somewhat disappointed. Last month I wrote a post where I took a look at the implications for tech stocks based on the October numbers. I'd like to take the same approach here. The primary category I look at is Computers and Electronic Products and the three sub-categories Computers and Related Products, Communications Equipment and Semiconductors. First, I was surprised to see how the annual numbers stacked up. On a year-to-date basis, 2007 has barely kept pace with 2006. The Computers and Electronic Products category shows shipments up only 0.6% and new orders flat. In all three sub-categories, both shipments and new orders were down anywhere from 1.4% to 4.5% (note that new orders are not available for the semiconductor industry.) This data seems in conflict with one of the major investing themes of 2007: tech stocks were strong while financials were weak. Hence the outperformance of the NASDAQ in...

With SanDisk ( SNDK ) getting ready to announce earnings on January 28, this is a good time to review the investment case for company. Back in November I wrote a post titled " SIA Forecast strengthens case for SanDisk ." The main points were that the stock had fallen to a level from which it has twice rallied in the past and that semiconductor growth over the next few years was on the rise with the most growth by far in the flash memory category. With the stock at a depressed level and growth for its main product expected to be robust, it seemed like the stock could be a buy for patient investors. Then, as now, the company's growth potential in terms of unit sales was not the problem. Memory chip oversupply and pricing issues were driving the company's shares lower as margins became increasingly squeezed. This concern continues to plague the company. According to TradingMarkets.com , up until October, tight supplies had kept a floor under prices. But leading NAND flas...

I'd like to look at the chart of the S&P 500 again this week and see if we can once again take the temperature of the markets. Looking at the chart below we can see that SPX had a very good move on Friday, gapping up at the open and finishing strongly. Moving Averages: As strong as this move was, it failed to clear the 200-day simple moving average. That level will in all likelihood provide some resistance to SPX as it tries to build on this week's gains. Note also that despite Friday's gain the 50-day simple moving average is just starting to cross below the 200-day SMA. This is often considered to be a seriously bearish indication. MACD: Looking at the MACD, however, we are on the verge of a bullish signal but it has not quite made it yet. RSI: In terms of relative strength, the RSI is neither oversold nor overbought but is at least moving in a positive direction on a short-term basis. Resistance: 1490 on the SPX was previously a support level; now that we are belo...

Major averages finished the week on an extremely positive note and some analysts are talking Santa Claus rally. Related ETFs shared in the holiday spirit. For example, after gapping down recently, we see SPY gapping up on Friday. Still, there are questions to be answered. If the S&P 500 gained 1.67% on Friday, why did SPY only gain 0.91%? Was it because SPY was in the top spot on the money flow list for Selling on Strength? With much of the selling in block trades, does that mean that institutions (the "smart money", perhaps) might be betting against this rally? If the SPDR Financial ETF (XLF) gained only 0.93% on Friday why did the UltraShort Financial (SKF) fall 3.62%? Three major Wall St firms reported earnings this week. Why did the ones that lost billions (Morgan Stanley and Bear Stearns) see their share prices increase while the one that executed well and turned a profit (Goldman Sachs) saw its share price fall? Why isn't it a sign of weakness when so many finan...

Yesterday the FTC released a set of proposed guidelines related to online behavioral advertising and how it impacts consumer privacy. Here are the major points as listed in the FTC release: Concern: greater transparency and consumer control regarding privacy issues Proposal: Every Web site where data is collected for behavioral advertising should provide a clear, consumer-friendly, and prominent statement that data is being collected to provide ads targeted to the consumer and give consumers the ability to choose whether or not to have their information collected for such purpose. Concern: data collected for behavioral advertising may find its way into the hands of criminals or other wrongdoers, and concerns about the length of time companies are retaining consumer data Proposal: Any company that collects or stores consumer data for behavioral advertising should provide reasonable security for that data and should retain data only as long as is necessary to fulfill a legitimate bu...

So NetSuite ( N ) went public today at $26 and the shares moved sharply as some IPOs tend to do, closing at $35.50. This is in spite of the fact that the price had already been adjusted upward twice before the stock came to market. The company is in a hot sector and Oracle Corp. ( ORCL ) CEO Larry Ellison controls a majority stake and this has contributed to the buzz around the stock. So at $35.50, is the stock a buy? Company Background NetSuite operates in the Software-as-a-Service (SaaS) sector. It provides business applications over the Internet so that customers do not need to install the software in their own datacenters. NetSuite offers an all-in-one solution that integrates accounting, sales, payroll, order fulfillment, purchasing, inventory, billing, CRM and more. It provides features that support eBay and offers a facility for users to create web sites that integrate tightly with the underlying accounting and inventory functions. Much like SalesForce.com, NetSuite has sales fo...

In a credit environment where CDO values are dropping like rocks and write-downs are sprouting all over Wall Street, one would think that Citigroup (C) would tread carefully when it comes to rolling out new debt products. That, apparently, is not the case. The following is from Bloomberg: "Citigroup has announced a new $165M CDO backed by 30 microfinance loans to entrepreneurs in 13 countries including Bosnia, Tajikistan, Mexico and El Salvador. Citi will also invest in the lowest ranking, or equity, portion of the CDO along with International Finance Corp., a unit of the World Bank, according to Fitch Inc. Microlenders make loans to low-income borrowers in developing countries who may struggle to get credit from local banks. The CDO will consist of six portions of debt, the highest is rated AA." What the heck is Citi doing rolling out CDOs based on loans to people who wouldn't qualify for a sub-prime loan in this day and age? Is there a significant risk of default among ...

Yesterday I wrote a post describing my opinion on the direction of the markets. I focused on the S&P 500 and, after reviewing the chart situation, came to the conclusion that the most likely direction was down. Today we opened with gap to the downside and the index never recovered. The gap is clearly visible in the chart below which shows what happened to the S&P 500 SPDRS ( SPY ) ETF. Shortly after I saw the gap, I decided it was time to nibble on a few shares of the ProShares UltraShort S&P500 ( SDS ) ETF. Purchased at $55.13, SDS closed today at $56.08 for a quick little 1.7% gain. The chart now looks worse than it did Friday. Today's sell-off came on decent volume but not extraordinary volume. This implies we have not yet seen the kind of capitulation that marks a bottom. Note also how the MACD on the chart above is on the verge of confirming the bearish direction. It looks like SPY might have a bit further to fall. Disclosure: author is long SDS

After three good weeks, markets reversed course and closed significantly lower this week. Expectations of a Santa rally are looking less likely and skepticism seems to be the order of the day. This week the Fed cut rates and announced a lending facility to inject liquidity into the credit market. Investors were less than impressed. Inflation reared its head in the PPI numbers as price increases were larger than expected. In spite of good news on retail sales and jobs, all the major averages finished the week down over 2% with the Russell 2000 down a whopping 4%. For a while now, Treasury bond prices have been going up every time stocks have gone down. This week we saw a turnaround in the bond market, with the smell of inflation causing bonds to sell off in lock-step with stocks. Seems like there was no place for an investor to hide this week. Comments on the S&P 500 In trying to gauge the market direction, it is hard to ignore the fact that the S&P 500 closed down 2.4% this wee...

On December 13, Microsoft (MSFT) provided a press release, with a nod to the holidays, entitled " Microsoft Unwraps Virtualization Surprise ." The surprise is that the long-awaited virtualization solution from Microsoft is going into public beta. It is available as part of the download of certain versions of Windows Server 2008. The new product, now named Hyper-V, provides some of the same server virtualization functionality currently offered by VMWare and XenSource which is now owned by Citrix Systems (CTXS). Some notable features are that Linux integration is available in beta today with other operating systems coming in future releases. This means that the Microsoft solution is not limited to running only Windows as a virtual environment. This takes away some of the advantages of VMWare (VMW) and XenSource which can virtualize Windows, Linux and Unix. Hyper-V is now included by default in Windows Server manager, which means enabling virtualization is as easy as installing...

As the credit crunch has unfolded, we have seen municipal bonds fall in value as bond insurers have weakened and concern mounts that mortgage problems will impact the ability of municipalities to collect tax assessment revenues. Merrill believes this is somewhat overdone and that the entire municipal bond sector has been tarnished though only isolated instances of problems are likely to occur. Without more precise risk assessment to identify those municipalities that will or will not suffer, investors will be throwing out the baby with the bath water. This implies that national muni closed-end bond funds are selling at deeper than average discounts to their net asset values. The chart below shows the yield ratio between AAA-rated municipal bonds and 10-year Treasuries. The ratio is currently at a multi-year high. Merrill expects the 10-year Treasury yield to fall to 3.5% by mid-2008, supporting an expectation that the relative yield of munis will remain at a higher than average level. ...

As the title of this post says, the tech stock outlook is becoming increasingly fragmented. For much of 2007, a simple investment in a couple of broad-based ETFs such as the QQQQ or XLK would have brought an investor double-digit gains. Now, as we get later in the cycle and the economic backdrop becomes somewhat questionable, doubts emerge in some tech sub-sectors. The following illustrates the "hot and cold" nature of the current tech environment. IT spending slowing From IDC , we have the following prediction: "Worldwide IT spending will grow at a slower pace in 2008. Economic uncertainties and downside risk will dampen IT spending growth in the U.S. and elsewhere. As a result, worldwide IT market growth will be a moderate 5.5-6.0%, down from 6.9% in 2007." From InformationWeek , we have the following quote: "In the most recent survey by the Society for Information Management, less than half of 130 CIOs and IT managers who responded (49%) predict their IT bud...

A contrary stock market indicator that has been humorously written about is the "magazine cover" indicator. For example, when a mainstream magazine writes about a big bull market in stocks, you can bet a correction is coming. A few days ago I was catching up on reading some RSS feeds that I subscribe too and I was struck by the list of bad news in the Financial feed from MarketWatch . It just seemed like one after another item described some negative development for one financial firm or another. A rough tally indicated that fully three fourths of the news items were negative. It gave the definite impression that financial stocks are still in a tailspin. It occurred to me that when the number of news items start skewing more toward the positive, maybe then we can say the bottom in financial stocks is behind us. With tongue in cheek, I call it the "RSS News Indicator" and it can give a quick sentiment indicator based on a snapshot of the recent news stream for the se...

Market Comments Markets staged a strong rally on Thursday that accounted for most of the gains seen this week. Interestingly, part of the impetus for the rally was an employment report from ADP that most analysts felt was largely overstated. The other incentive for investors was the announcement of the rescue plan for sub-prime homeowners by President Bush and Treasury Secretary Paulson. I am not sure why this was such a strong catalyst for a rally when nothing that wasn't already known was presented. Markets took off anyway and we now have two weeks in a row where the major averages achieved gains. In other news that had an unexpected effect, OPEC held production steady and the US government reported a large draw-down in crude stocks. Instead of rallying, oil actually fell and finished the week down slightly. The anxiously awaited Labor Dept. payrolls number was announced Friday. Expected to be market-moving news, especially in light of the ADP number, the actual numbers indicate...

Back in July I wrote a post that investigated whether companies with the most patents ended up with the best stock performance. It turned out that the answer was "no" but in looking at some of the companies in our sample set, we came across Digimarc ( DMRC ). The company is in the news again today as Nielson announced a partnership with Digimarc to implement what amounts to a DRM system on Internet video. An excerpt from the announcement Nielson made today follows: "The Nielsen Company and Digimarc Corporation (NASDAQ: DMRC) today announced a new service - Nielsen Digital Media Manager - that will enable media companies, social networks, peer-to-peer services and user generated content sites to monitor and manage the distribution of media content across the Internet. Nielsen Digital Media Manager will use digital watermarking and fingerprinting to establish an industry-wide rules-based solution to copyright security and to assure copyright compliance. By providing a m...

Starting in November, Generex Biotechnology ( GNBT ) has been quite volatile. That's about the time the company announced that its Oral-Lyn product had been licensed for commercial use in India. In October, a similar license was obtained in South Africa. The company is in the process of securing approvals to market the product in various Middle Eastern countries, as well. In mid-November, Wall Street Strategies, an independent stock market research company, published a report on the company. They pointed out that the India news was a distinct positive for GNBT and that the stock is a buy. In addition, their analyst provided a further opinion as follows: "Currently, Oral-lyn is in phase III testing in North America. We expect that approval would automatically make this a $5.00 stock, but once sales begin we think the stock could move even higher." This sounds good but investors should be aware that Generex has retained Wall Street Strategies to provide investor relation se...

I just wrote a post looking at the charts of the ETFs that track the major averages. In this post I'd like to look at the ETFs that track REITs, financials and technology using the TradeRadar software and traditional technical analysis. iShares Dow Jones US Real Estate ETF (IYR) Daily Chart / Sell Signal: with the Window Start set way back at the low made back around 5/23/06 we still have a clear TradeRadar SELL signal. There is no hint of it moving out of the SELL zone yet Daily Chart / Buy Signal: with the Window Start set at 2/7/07 there is a BUY signal almost formed but the peak has not yet made it into the BUY zone. With the Window Start set at 10/7/07 and the filter set to 4 days there is a better BUY signal that is just moving into the BUY zone though with somewhat weak signal strength. Weekly Chart / Sell Signal: with the Window Start set back in June of 2006 the SELL signal is still strong and solid Weekly Chart / Buy Signal: with the Window Start set at 2/12/07, this ETF...

I'm looking at the charts and also trying to use the TradeRadar software to make sense of what this market is doing. Here is what I am seeing in the ETFs used to track the major averages. Examining the Diamonds Trust Dow 30 ETF (DIA), what can we say about the Dow Jones Industrials? Daily Chart / Sell Signal: with the Window Start set to 3/2/07, TradeRadar still shows DIA deep in the SELL zone Daily Chart / Buy Signal: with the Window Start set to October 9, the most recent high prior to the current downturn, we actually get a BUY signal on this short term chart. With the filter set to 4 days, the signal strength is still a little weak but otherwise the indicators look pretty good. Weekly Chart / Sell Signal: with the Window Start set to the week of March 5, a moderate SELL signal is flashing Weekly Chart / Buy Signal: not enough data points to generate a signal based on a Window Start set to the week including October 9 Moving Average Analysis: for three days now, DIA has managed ...