Stocks Slide With Portugal Bonds as Treasuries, Gold Gain

European stocks fell and Portuguese bonds dropped as concern deepened over missed debt payments by a company linked to the nation’s second-largest bank. Standard & Poor’s 500 Index futures signaled a selloff earlier this week will resume, while the yen, Treasuries and gold gained.

The Stoxx Europe 600 Index lost 1.3 percent at 8:35 a.m. in New York, led by a gauge of banks dropping to this year’s low. Financial bond risk increased in Europe for a fifth day. Standard & Poor’s 500 Index futures fell 0.9 percent. Portugal’s 10-year bond yield rose 11 basis points to 3.88 percent while Treasuries gained and the yen advanced against all but one of its 16 major peers. Indonesian stocks climbed to a one-year high as polls showed Jakarta’s Governor Joko Widodo won the presidency. West Texas Intermediate oil slid 0.3 percent to $101.62 a barrel while gold climbed 1.1 percent.

Bonds of Europe’s most-indebted nations declined as speculation resurfaced that the euro region remains vulnerable to shocks as it emerges from the sovereign debt crisis. The sell-off comes after minutes of the Federal Reserve latest meeting showed yesterday some policy makers were concerned investors may be growing too complacent. The value of global equities climbed to a record $66 trillion last week, data compiled by Bloomberg show.

Photographer: Dimas Ardian/Bloomberg
One-month rupiah forwards added 0.2 percent as unofficial counts showed Jakarta… Read More
“The concern of an event like this is always determining whether it’s occurring in isolation or whether it’s the first domino,” said Lawrence Creatura, a fund manager at Federated investors Inc. in Rochester, New York. His firm manages about $363.8 billion. “People will shoot first and ask questions later when news like this hits. It’s a classic flight to safety across the equity, commodities and bond markets. Portugal has been perceived as a weaker link so it’s not a particular surprise they’re encountering this kind of trouble now.”

Fewer Americans than forecast filed applications for unemployment benefits last week, a sign the labor market is strengthening, a government report showed today.

Peripheral Bonds

Portuguese bonds fell for a fourth day. The yield on 10-year Italian notes rose six basis points to 2.94 percent and Spain’s rate jumped six basis points to 2.82 percent. The Markit iTraxx Europe Senior Financial Index of credit-default swaps on 25 European banks and insurers rose two basis points to 71 basis points, the highest since June 4.

While Portugal’s central bank said Banco Espirito Santo SA, the nation’s second-largest lender, is protected after its parent missed debt payments, Moody’s Investors Service downgraded a company in the group citing a lack of transparency and links to other companies.

Banco Espirito Santo tumbled 17 percent before the Portuguese securities regulator said it stopped trading in the shares pending an announcement. Espirito Santo Financial Group SA, which owns 25 percent of the lender, fell 8.9 percent before the company suspended trading earlier in stocks and bonds, saying it’s “currently assessing the financial impact of its exposure” to Espirito Santo International, which has missed payments on short-term paper.

Fugro Tumbles

More than nine shares declined for every one that advanced in the Stoxx 600, with trading volumes 72 percent higher than the 30-day average, according to data compiled by Bloomberg. The gauge of banks tumbled 2.7 percent to the lowest since Dec. 18.

Banco Popular Espanol SA (POP) dropped 4.8 percent. The Spanish lender said it postponed a planned issue of the riskiest bank debt because of “heightened volatility” in credit markets.

Fugro NV (FUR) sank 20 percent, the most since November 2012, after the Dutch deepwater-oilfield surveyor forecast a drop in profit margin and writing off of as much as 350 million euros ($477 million). Skanska AB lost 2.5 percent after the Nordic region’s biggest construction company by global revenue said it will scale down operations in Latin America after booking 500 million kronor ($73.7 million) in project writedowns and restructuring costs.

Jobless Claims

The S&P 500 index (SPX) rebounded 0.5 percent yesterday following two days of losses.

Jobless claims declined by 11,000 to 304,000 in the week ended July 5, the fewest in more than a month, a Labor Department report showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg called for 315,000.

Federal Reserve Bank of St. Louis President James Bullard said yesterday that a surprisingly fast decline in unemployment will fuel inflation and back the case for higher interest rates.

The Jakarta Composite Index added 1.4 percent to 5,095.20, heading for its highest close since May 2013. The rupiah gained 0.7 percent to 11,555 per dollar, according to prices from local banks, after touching the strongest level since May 22.

Both Widodo, known as Jokowi, and his opponent Prabowo Subianto claimed victory in yesterday’s presidential vote. Jokowi had about a five percentage point lead in the poll, according to unofficial counts from two survey companies that declared him the winner. Official results aren’t due for about two weeks. Bank Indonesia will probably hold its reference rate at 7.5 percent today, according to the median of 21 estimates from economists surveyed by Bloomberg.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 0.3 percent, after losing 1.6 percent yesterday, its biggest decline in two weeks. The Shanghai Composite Index slipped less than 0.1 percent, extending yesterday’s 1.2 percent retreat.

China Exports

China’s overseas shipments fell short of the 10.4 percent expansion that was the median of 47 economists’ estimates compiled by Bloomberg. Imports grew by 5.5 percent in June, less than the 6 percent increase projected. The trade surplus fell to $31.6 billion for June, from $35.92 in May. Data yesterday showed producer prices fell last month at the slowest pace in more than two years.

“Extreme cautiousness towards China’s economy has receded overall, with the government showing signs it will step in to support growth when needed,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc.

West Texas Intermediate oil dropped to $102.01 a barrel. Gasoline inventories increased by 579,000 barrels last week as a measure of consumption slid, the Energy Information Administration said yesterday. Brent declined 0.2 percent to $108.10 a barrel, the ninth consecutive decline in the longest streak since May 2010. The crude closed at a two-month low yesterday amid signs that Libya, the holder of Africa’s largest crude reserves, will boost exports, while Iraqi production remains unaffected by an insurgency.

Treasury Sale

Gold for immediate delivery jumped to $1,342.23 an ounce, the highest since March 19. Palladium rose 0.3 percent to $876.25 an ounce, the 14th consecutive advance and the longest streak since June 2000. Cotton fell 0.4 percent to the lowest price since July 2012 on ample supplies.

The yield on 10-year Treasuries dropped five basis points to 2.50 percent. The rate on 30-year notes declined five basis points to 3.33 percent as the U.S. prepares to sell $13 billion of the debt.

Greece’s five-year note yield increased 11 basis points 4.33 percent. The government sold 1.5 billion euros of three-year notes via banks, priced to yield 3.5 percent. That’s higher than forecasts earlier this week for a rate of about 3 percent from HSBC Holdings Plc and Royal Bank of Scotland Group Plc.

The yen strengthened 0.3 percent to 101.36 per dollar and gained 0.3 percent to 138.31 per euro.

Australia’s dollar retreated from the highest in a week, falling against all of its 16 major counterparts after the nation’s jobless rate climbed. The Aussie weakened 0.4 percent at 93.74 U.S. cents.

DRYSHIPS Analysts Update

Re: Jack A. Bass Managed Accounts

1 % set up fees

20 % annual performance fee

Shares of DryShips (NASDAQ:DRYS) was the target of some unusual options trading activity on Friday. Stock investors acquired 21,588 call options on the stock, AnalystRatingsNetwork.com reports. This is an increase of approximately 179% compared to the average volume of 7,726 call options.

DRYS has been the subject of a number of recent research reports. Analysts at Zacks reiterated a “neutral” rating on shares of DryShips (NASDAQ:DRYS) in a research note to investors on Friday. They now have a $3.00 price target on the stock. Separately, analysts at UBS AG initiated coverage on shares of DryShips (NASDAQ:DRYS) in a research note to investors on Thursday, August 22nd. They set an “outperform” rating on the stock. They noted that the move was a valuation call. Finally, analysts at Imperial Capital initiated coverage on shares of DryShips (NASDAQ:DRYS) in a research note to investors on Thursday, August 22nd. They set an “outperform” rating and a $2.75 price target on the stock.

Five equities research analysts have rated the stock with a hold rating and three have assigned a buy rating to the stock. The stock presently has a consensus rating of “Hold” and a consensus target price of $2.40.

DryShips (NASDAQ:DRYS) traded up 4.16% on Friday, hitting $2.88. 23,919,192 shares of the company’s stock traded hands. DryShips has a 1-year low of $1.46 and a 1-year high of $2.78. The stock’s 50-day moving average is $2.12 and its 200-day moving average is $1.95. The company’s market cap is $1.163 billion.

DryShips (NASDAQ:DRYS) last posted its quarterly earnings results on Wednesday, August 7th. The company reported ($0.05) EPS for the quarter, beating the Thomson Reuters consensus estimate of ($0.07) by $0.02. The company had revenue of $336.10 million for the quarter, compared to the consensus estimate of $329.57 million. During the same quarter in the prior year, the company posted ($0.05) earnings per share. The company’s quarterly revenue was up .0% on a year-over-year basis. On average, analysts predict that DryShips will post $-0.25 earnings per share for the current fiscal year.

 

Avago Technologies Limited

AVGO : NASDAQ : US$36.56
BUY 
Target: US$45.00

COMPANY DESCRIPTION:
Avago Technologies Limited is a designer, developer and global supplier of analog semiconductor devices. Avago offers products in three primary target markets: wireless communications, wired infrastructure, and industrial and automotive electronics. Applications for Avago products include smartphones, connected tablets, consumer appliances, data networking and telecom equipment, and enterprise storage and servers.

Technology — Communications Technology — Semiconductors
STRONG Q3/F13 RESULTS; WIRELESS AND WIRED DIVISIONS DRIVE STRONG Q4/F13 GUIDANCE
Investment recommendation:

Avago reported strong Q3/F13 results above our estimates with strong Wired and Industrial division sales offsetting weaker-than-expected Wireless demand. Further, Avago guided to strong sequential sales growth in Q4/F13 driven by strong
trends in the company’s Wireless and Wired divisions. We believe Avago’s proprietary technologies, strong IP portfolio, and diverse customer base in several growth markets position the company for strong long-term growth trends with industry-leading margins.

We reiterate our BUY rating and increase our price target to $45.
Investment highlights
 Q3/F13 sales of $644M and pro forma EPS of $0.74 were above our $623M/$0.68 estimates driven by 18% Q/Q sales growth in the higher-margin Industrial and Wired Infrastructure (excluding CyOptic sales) divisions versus our mid-single digit growth estimates for each division. CyOptics contributed $21M in sales during the quarter and should contribute $55M in Q4.
 Wireless sales increased only 3% sequentially or below management’s high-single digit sequential growth guidance, but
this is consistent with our analyses indicating softer high-tier smartphone sales trends during Q3/F13.
 Avago management guided to a 12-15% Q/Q sales increase for Q4/F13 driven by solid Q/Q growth in the Wireless and Wired Infrastructure divisions. Management anticipates mid-teens percent Q/Q growth in the Wireless division due to sales ramping into new smartphone programs at both Apple and Samsung, as Avago is benefitting from increased content share in high-end LTE smartphones.
 Given the strong results and our expectations for sustained growth trends, we have increased our F2013 pro forma EPS from $2.76 to $2.82 and F2014 from $3.29 to $3.30.
Valuation: Our $45 price target is based on shares trading at roughly 13x – 14x our F2014 pro forma EPS estimate.

Skyworks Solutions

The old Skyworks Logo

The old Skyworks Logo (Photo credit: Wikipedia)

SWKS : NASDAQ : US$23.64
BUY 
Target: US$30.00

COMPANY DESCRIPTION:
Skyworks is a leading supplier of power amplifiers, front end modules and other RF components for mobile devices (handsets, smartphones, and tablets) and communications infrastructure.

Investment recommendation:

While investors remain concerned regarding potentially slower high-end smartphone market growth in mature markets, we believe Skyworks growing content share and growing sales initiatives in new markets should result in 12-15% annual sales growth with expanding margins over the next couple years. Given Skyworks’ broad RFIC portfolio and customer base, we believe Skyworks growing portfolio of RF and analog solutions positions Skyworks to grow content share within its handset customer base and expand Skyworks’ content share in other markets such as wireless infrastructure, 802.11ac WiFi, and the M2M market. We reiterate our BUY rating and increase our price target $30.
Investment highlights
 We believe Skyworks is well positioned to hold strong dollar content share with leading LTE smartphone platforms and gain incremental share with its SkyOne integrated front-end solution in smartphones during F2014. Further, we believe new smartphone socket wins including power management ICs and WiFi PAs, recovered sales in wireless infrastructure, and strong growth from a diverse set of increasingly connected consumer and M2M market verticals should drive higher-margin HPA sales growth.
 In fact, we anticipate an increased mix of higher margin new products within both the Handset and HPA businesses over the next several quarters. Therefore, we are modeling steady gross margin improvement from 43.4% in F2013 to 44.5% in F2014. Our F2014 pro forma EPS estimates of $2.65 remains above consensus estimate of $2.55.
Valuation:

Our $30 price target is based on shares trading at roughly 11x-12x our F2014 pro forma EPS estimate.

Contrarian Alert: Is It Time To Buy Cliffs Natural Resources (CLF)?

POSTED ON MAY 22, 2013 BY   Commodity HQ

The party continues on Wall Street; investors remain bullish on stocks judging by the sheer price action as both the S&P 500 and Dow Jones Industrial Average managed to close out last week well above their all-time highs. The economic data front is sending hints of a potential downturn as manufacturing indicators remain weak; nonetheless, this has failed to put a noticeable dent in the bulls’ armor of confidence as markets shrugged off last week’s worse-than-expected industrial production data [for more market news and analysis subscribe to our free newsletter].

Not every stock is surging to record highs; in fact, one particular large-cap miner offers a risky, but compelling, opportunity for investors still looking to get a piece of the action on Wall Street. Contrarian investors should add Cliffs Natural Resources (CLF) to their watchlist because this former S&P 500 sweetheart is resting on major historical support, thereby offering a great entry point for those with a bullish outlook for the steel industry and the global economic recovery as a whole.

Chart Analysis

Consider CLF’s 10-year weekly performance chart . This stock has endured a downtrend since peaking in mid-2011 and it has failed to take part in the 2013 bull run seen across Wall Street. What’s noteworthy is the fact that CLF is trading and holding right at a major support level (red line) which it previously rebounded off in mid-2009; after this, it posted a monstrous gain when it surged to over $100 a share in just two years. CLF has also seen above-average buying volumes swoop in at these low levels over the past few weeks, perhaps suggesting that institutional buyers are loading up on this bargain miner.

Consider CLF’s year-to-date daily performance chart . Notice the big volumes on 3/27/2013; what’s even more encouraging is that CLF has manage to hold above $18 a share while slowly climbing higher along a rising support level (blue line). Another encouraging sign is the above-average buying volumes see on 4/25, which further adds weight to the bullish argument at hand.

nvestors looking to jump in long should be mindful of the overarching risks plaguing this stock; fundamentally, iron ore mining has seen very sluggish growth due to the stagnant global recovery, while technically, CLF is still stuck in a long-term downtrend.

Outlook

Hints of global growth should drive this stock higher as increased steel production requires iron ore, which is CLF’s staple. In terms of upside, the next resistance level for this stock comes in at around $25 a share. On the other hand, a broad-market correction can easily sink it back below $20 a share, while a break below $17 a share will likely welcome serious selling pressures. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

NIKE How Five Hundred Bucks and a Handshake Created a Colossal Stock Market Winner

Footballshoes of the mark Nike.

Footballshoes of the mark Nike. (Photo credit: Wikipedia)

By Mitchell Clark, B.Comm. for Profit Confidential

One company that always reports early is NIKE, Inc. (NYSE/NKE).

The company has doubled on the stock market since 2010, and it has more than tripled since 2006.

This kind of stock market performance really is amazing. In just three years, a $12.5-billion company has become a $25.0-billion company.From Oregon, Bill Bowerman and Phil Night created Blue Ribbon Sports with $500.00 each and a handshake. In January of 1964, Bowerman and Night ordered 300 pairs of Tiger brand shoes from Onitsuka Inc. of Kobe, Japan for distribution in the U.S. market. Night began selling the shoes out of his Plymouth “Reliant,” and Bowerman began tearing them apart.

Bowerman took an idea from his wife’s waffle iron and created a new running shoe.

Jeff Johnson (a friend and the company’s first employee) came up with the NIKE name in 1971. Shoes were successfully tested and Carolyn Davidson, a graphic design student at PortlandStateUniversity, created the “swoosh” logo. The company’s first shoes were sold at the U.S. Track & Field Trials held in Eugene, Oregon. The rest, as they say, is history.

As a stock market investment, NIKE has mostly been excellent. The position was flat between 1997 and 2004. The company signed Eldrick “Tiger” Woods in 1996. In its latest quarter (ended February 28), the company’s comparable sales grew nine percent to $6.2 billion, up solidly from $5.7 billion. Comparable earnings grew from $560 million to $866 million, for a gain of 55%, while earnings from continuing operations were $662 million, up 16% from $569 million.

Sales growth was strongest in North America (18%), followed by Central and Eastern Europe (16%), then Western Europe (8%). Western Europe’s growth is uncharacteristic compared to other earnings reports from many global brands. On February 1, 2013, NIKE sold its Cole Haan brand to Apax Partners for $570 million. The deal resulted in a gain on sale of $231 million. But on November 30, 2012, NIKE sold Umbro to Iconix Brand Group for $225 million. This resulted in a loss of $107 million, net of tax.

I consider NIKE to be fully valued on the stock market currently. With a price-to-earnings ratio of approximately 25, the company’s earnings growth combined with its dividend suggests it’s a little pricey.

NIKE is a shining example of how a business can still be very successful during tough times. Arguably, the position held up extremely well on the stock market through the financial crisis and the recession.

Wall Street estimates for the company have been going up for the next quarter, all of 2013, and all of 2014.

Realistically, I wouldn’t say the stock is a buy right now, simply because the stock market is at an all-time record high. It’s very difficult to consider new positions with the stock market sitting so high. I would say, however, that this company would be worthy of consideration for long-term investors if the stock were to experience a meaningful retrenchment. While a track record of success certainly cannot predict the future, NIKE’s demonstrated record of innovation and wealth creation still makes it a winner.

 

John Bogle, MacBeth and the Market

Welcome to the Stock Market Casino

 
“Tranquil,” BloombergBlack’s Adam Freedman called U.S. stocks last week. Instead of the topsy-turvy markets of recent years, investors are seeing prices gently rise, often for days at a stretch. A measure of such volatility, the Chicago Board Options Exchange Volatility Index, last month hit its lowest level in six years.
 
Though traders who thrive on volatility may complain, many other investors are quite happy. The S&P 500 gained 10 percent in the first quarter, while the value of global stocks rose $2.6 trillion.
 
Adding to the upbeat mood is greater enthusiasm for initial public offerings, or IPOs, which raised almost $20 billion worldwide in the last three months. “IPOs are inherently risky,” says Scott Sweet, co-founder of research firm IPO Boutique. Investors are more likely to take a chance when “literally day after day we’re setting new records.” 
 

Case in point: Pinnacle Foods rose 21 percent in the week since its IPO. Housing contractor Taylor Morrison is the “hottest deal coming out right now,” Sweet says. Also expected are IPOs from the world’s largest satellite-services company, Intelsat, and from SeaWorld.

What the market’s mellow mood hasn’t done is soothe nervous investors, who fear this is the calm before another storm. This is the “most hated rally in Wall Street history,” says FusionIQ’sBarry Ritholtz, a phrase he first used in Oct. 2009 before U.S. stocks rallied a further 50 percent. “People not only fought it the whole way up, they continue to fight it,” he told BloombergTV on April 2.

So, many investors are seeking protection against an expected spike in volatility. Their armor comes from so-called “minimum volatility equity funds” — a relatively untested batch of funds designed to limit exposure to big market swings. According to BlackRock, that category of exchange-traded fundsattracted $4.1 billion last quarter, a 76 percent increase in assets.


People like Vanguard founder John Bogle have no patience for such worries. When it comes to the market’s daily ups and down, he told me: “Ignore it.” Anyone who owns stocks should be investing for the long run, in which case day-to-day, or even year-to-year, fluctuations don’t matter. When it comes to volatility, Bogle quotes William Shakespeare’s “MacBeth”: “It is a tale told by an idiot, full of sound and fury, signifying nothing.”
.

Stock Market Magic: Building Your Apprentice Millionaire Portfolio 30 % Return Annually

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Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today’s stock market

 

Best Stock Market Indicator Ever

AMP welcomes guest contributions. The views presented here do not necessarily represent those of AMP

See Is This the Best Stock Market Indicator Ever? for a discussion of this technical tool.

The charts below are current through the week’s close.

 

Monthly OEXA200R Over the Past Few Years

 

Click to View

 

Interpretation:

The OEXA200R ended the week unchanged at 88%.

Of the three secondary indicators:

  • RSI is POSITIVE (above 50).
  • MACD is POSITIVE (black line above red).
  • Slow STO is POSITIVE (black line above red).

Commentary

According to this system the market is tradable.

The “Printing Press Bull Market” continues. It could be seriously argued that since 2009, Fed intervention in its various forms has for all practical purposes simply camouflaged a second full blown Great Depression. Realistically however, Fed Chair Bernanke can only feed the economy so many cans of QE Red Bull before it eventually crashes. Consider the following realities:

  • After five years GDP remains feeble. 
  • U6 (actual) unemployment is over 14%. Many of the long term unemployed will never gainfully work again because they have either gone on disability or their skills are so rusty that employers will never hire them for the equivalent of their former positions. For many of those lucky enough to find work it doesn’t provide as much income as their old job did.
  • The gusher of money coming out of the Fed hasn’t yet caused overall inflation to increase, true – just inflation of the stock and now housing markets. But how can a country print an ocean of new money out of thin air attached to a stagnant GDP without eventually causing inflation? It’s never happened before in history and it won’t happen this time.
  • Southern Europe is in a full blown modern Great Depression, unemployment and other indicators make that clear. The relatively healthier economies of northern Europe continue to drag that ball and chain behind them with no end in sight.
  • The events in Cypress have been nothing short of eye-popping. The global banking system is built on solid faith that depositors can park their savings in an account and have it protected from robbery, as opposed to hiding their cash in a mattress. Cypress, however it turns out, has severely undermined that faith. The idea that a bank can engage in the financial equivalent of internet gambling, reap enormous profits if the gamble succeeds (not to be shared with depositors, of course) but can without warning raid depositors’ accounts if the gamble fails, ignoring deposit insurance and myriad law is mind boggling. And this idea had the quiet approval of the I.M.F. (meaning, the U.S. government). As hair brained as the Cypress precedent is, similar “bail-in” noises are even coming out of Canada.
  • But really, how fragile is the economic picture? Here’s one indication: Atty. General Eric Holder (for Pres. Obama) recently stated that he would not criminally pursue the mega-thieves at Bank of America, HSBC and other too-big-to-jail banks because it would just be too “unsettling” for the economy. The Attorney General is afraid to enforce the law against the largest, most dangerous financial criminals in world history, that’s how fragile it is.

The force driving the S&P to new highs is not actual economic recovery but mass delusion. The idea that no matter what – hell, high water, incompetence or criminality – the U.S. Government will do whatever it takes to keep the systemic banks afloat. That, and the assurance that the Fed will also go to any economically irrational extreme to keep Wall Street and those banks happy (since those banks ARE the Fed, that’s no surprise). All in the slim hope that if the bogus appearance of recovery and prosperity can be maintained for long enough, actual recovery and prosperity will somehow materialize in time. But in the certainty that either way those who control Wall Street and the systemic banks will continue to make a fortune.

The recent bull market in the S&P is based on the same mass speculative self-delusion that has characterized every other financial bubble since the Tulip Mania of the 17th century. Will the market crash next week or next month? Probably not. But all the other bubbles eventually ended, and in the same way that this one eventually will.


Background on How I Use This Indicator

The OEXA200R is a valuable metric used to accurately assess the state of the market in order to make profitable trading decisions. That is, whether we are in a bull, a bear or transitioning from one to the other, as well as market volatility and risk within each of those situations. Historically, it has also given traders a clear early warning signal of impending serious market downturns and later safe re-entry points. While not intended as a day trading tool per se it can certainly be used as background information by day or highly speculative traders. Simply put, the OEXA200R gives traders the ability to identify the most opportune conditions within which to execute their various long, short or hold strategies.

Following a major market correction, the conditions for safe re-entry are when:

   a) Daily $OEXA200R rises above 65%

And two of the following three also occur:

   b) RSI rises over 50
c) MACD black line rises above red line
d) Slow STO black line rises over 50 and is also above red line

Without the solid foundational support of two out of three secondary indicators it is unsafe to trade even if OEXA200R edges above the 65% line. Once two turn positive, the market is considered safely tradable as long as OEXA200R remains above 65%. Volatility and risk for long traders are relatively low. The trend is on their side.

When Daily OEXA200R drops to 65% it is taken as the conservative signal to exit all long positions, sit on the sidelines with your cash and wait for some clarity before proceeding. Volatility and risk increase substantially. Since 2007, this has often been a “tipping point” condition presaging a major market drop.

If the OEXA200R does not rebound but remains below 65%, how to proceed depends on the overall trend of the market, the macro-picture. During the cyclical bull of 2003 to 2007, the market was still safely tradable with OEXA200R in the 50% to 65% zone because there was enough upwelling lift in the S&P at that time to minimize the chance of a sharp, significant market downturn.

The problem is that we can by no means confidently compare our present situation to that of 2003 – 2007. There is no strong, steady wind pointing the market weathervane in one direction, it is being buffeted by swirls and gusts in unpredictable ways. To better understand this, take a look at the charts below, in particular the overall trend of the OEXA200R during the 2003 – 2007 cyclical bull compared to the trend from 2007 to present.

 

Click to View

 

 

Click to View

 

The S&P chart indicates that for the past five years we have not had a steady upwelling trend in the market comparable to 2003 – 2007. Absent that underlying support, the OEXA200R has undergone significant gyrations since 2007. Notice also that even in spite of the Fed-fueled rally, the S&P volume has experienced a steady decline since 2009, a classic Bear indicator.

If the OEXA200R drops below the 50% line we regain clarity as to the market’s direction. That will be the strong signal to exit any remaining long positions immediately in expectation of a serious, imminent market decline. Conversely, it will also be the clear signal to go short to take advantage of that sharp decline.

In my opinion, the most significant indicator of where we stand today is the fact that the market is above both its 140 year historical trend line and the trend line for the secular bear that began in 2000. These are the marco-forces that will gravitationally pull the market back into equilibrium at some point in the near future.

How far will the market drop? QE3 might save the day once again, temporarily. But in light of the factors mentioned above, it should come as no surprise if by 2014 we end up experiencing a market event worse than that of 2008 – 2009. Luckily, OEXA200R should give us ample advance warning of the next major correction however we want to trade it. Buckle up!

 


NoteStockcharts.com offers free access to the $OEXA200R indicator on a daily and weekly basis. The monthly view requires a subscription. Stockcharts allows users the option to download the last two years of indicator data. Unfortunately, I have not found a source for longer-term $OEXA200R data for performance back testing. Meanwhile, here is a link to a chart that gives a better look at the correlation between the $OEXA200R and the S&P 500 over the past decade.

 

 

(c) John F. Carlucci

5 Stock Trading Mistakes You Should Avoid

The trading floor of the New York Stock Exchan...

The trading floor of the New York Stock Exchange in 1930, just six months after the crash of 1929 (Photo credit: Wikipedia)

Guest Writer Author Pam Johnson is a financial professional who trades on the Wall Street Stock Exchange daily. She obtained her degree from one of the Best Master’s in Finance Online programs in the country.

Many people, especially in previous markets, have made a lot of money stock trading. This is because wild swings in the market, especially to the positive, can happen at any moment. A lot of people are not successful, and a lot of that has to do with their mentality, rather than their intelligence. This is because stock trading can be more psychological than people realize. Of course, there is no system to use to get rich quick, but if stock trading is handled correctly and the right research is done, there is no reason that ANY person cannot do well, no matter their expertise.

Trading too Often
Many people make the mistake of trading too often. Of course a trader wants to trade, but sometimes, it is best to let a winning stock ride, as it will often continue on that path. This is due to the momentum of other traders pushing the stock higher. The other negative aspect of trading too often is that commissions from brokers can add up, especially to the trader that is just starting up.

Falling in Love with Your Choice
Never fall in love with a company or a stock. As a trader, stocks should solely be an instrument to make money, whether it is held for 5 minutes, 5 hours or 5 days. There are a lot of great companies with great ideas, but as a trader, none of that matters. The next thing that matters is the next tick of the stock.

Averaging Down
Many traders and long term investors will average down. That is, if they bought a stock that has now dropped in price, they will buy more of the stock, in hopes of making their money back. This can sometimes be okay for a long term strategy, but as a trader it is a horrible idea, as putting more money into losers can cost a trader dearly- known as  ” trying to catch a falling knife”.

Holding Too Long
Holding a stock too long can be costly in two ways. Holding too long can hold up funds that would otherwise be used to make other trades. It also goes against the nature of trading, the longer a trader holds, the more likely that something will go bad.  Some think a trader should never be holding stocks long term – on the other hand Warren Buffett does not describe himself as a trader.

Eggs in One Basket
It can be tempting to put all, or a lot of your money in one stock. As tempting as it may be, any stock at any time can drop instantly, not only due to market conditions, but fraud, or unfavorable news.

Stock trading can be  lucrative, and what separates the winners from the losers is very fine. The great thing is that almost everyone can be successful if they do it properly. It is more important to be strong psychologically, rather than be good with math or numbers. In the end, your failure or success will certainly be due to your decisions in these matters in addition to  your knowledge of financial statements.

 

Morgan Stanley Says iPhone Demand Is Off The Charts

Image representing Steve Jobs as depicted in C...

Image via CrunchBase

 

Apple’s stock has been crushed since the end of September when it closed above $700 for the first time ever. 

On Friday it closed at $509.79, a new low in this slump.

As Apple’s stock has fallen, analysts have slowly started dialing back expectations. Jefferies, UBS, and tonight, Citi, all cut their price targets on the stock.

All three are cutting for basically the same reason — Asian suppliers say Apple cut its orders for the iPhone 5 in the first quarter of the year. This suggests demand for the iPhone is not fantastic, though it’s probably still good. The other reason is that the iPad Mini is eating into sales of the full sized iPad.

Morgan Stanley analyst Katy Huberty is out with a note knocking down both of those theories. Here’s the key takeaways from her note:

  • There is “strong demand” for the iPhone 5. “Importantly, a greater percentage of consumers plan to purchase the higher priced iPhone 5 as compared to iPhone 4S mix a year ago. As a result, we see potential upside to both our 50M unit (+35% Y/Y) and $642 (-4%) ASP assumptions in C4Q.”
  • The iPad is doing better than you think against the iPad Mini. “Forty-seven percent of iPad mini purchases are to new customers, only slightly lower than the 56% for iPad 9.7” suggesting cannibalization risk is manageable.”
  • Apple is “holding its own against Samsung.” Samsung’s success isn’t coming at the expense of Apple, rather at expanse of other Android phone makers.

Of all of these, the most shocking is the idea of beating 50 million iPhones sold this quarter. If Apple hits 50 million or above, it will silence many of the skeptics.

Apple stock fell Friday to $ 510

That’s the lowest close for the stock since its recent swoon began in September.

(It’s also a level that Apple first breached on the way up last winter. The stock is still up sharply this year, having entered the year at about $400.)

What’s going on?

Several things.

Some are fundamental, having to do with changes in Apple’s business.

Others are market-related (tax-related selling is likely having a significant impact).

Still others related to sentiment.

Here are some of the issues:

  • First, in news today, Apple has reportedly slashed its orders for iPhones for the first quarter of next year. According to UBS and other sources, Apple cut its “build” orders from 35-40 million units to 25-30 million. This suggests that sales of the all-important iPhone may be far lower than Wall Street has been expecting. It also suggests that the iPhone 5 has not been the colossal hit that Apple needed it to be.
  • More broadly, Apple has been a monster of a stock for the last decade, and some investors are likely taking the opportunity to lock in these gains while paying today’s low capital-gains tax rates. Whatever deal the government finally arrives at with regard to the Fiscal Cliff (if any), it will likely include a hike in the capital gains rate.
  • Apple recently shot its wad from a product-launch perspective, and analysts aren’t expecting anything truly exciting to happen until next summer at the earliest. That gives short-term investors little reason to hang on to the stock.
  • Apple’s amazingly high profit margin is likely to decline over the next several years, as Apple’s product mix shifts toward lower-margin tablets from the high-margin iPhone and the iPhone margin itself declines with the introduction of lower-priced phones. This suggests that earnings are likely to grow more slowly than revenue, in contrast to the situation for the past 5 years.
  • Apple’s next revolutionary new product–a TV or TV device of some sort–appears to have been postponed by a year. Analysts are also not sure what this product will be and how it will sell. Dozens of companies have tried to reinvent TV over the last 15 years, and almost all of them have failed. Apple also appears to have met resistance from the TV industry, which will do everything it can to preserve the status quo.
  • Apple’s competitors are catching up in both smartphones and tablets, so Apple no longer has the leverage with distributors and consumers that it once did. This, too, could eventually lead to more margin pressure.
  • Lastly, Apple really is finally entering the “post-Steve Jobs” era, and it remains to be seen how successful the company’s next generation of products will be.

All of these factors are likely weighing on Apple’s stock.

But here’s the good news:

The stock is cheap.

Apple is now trading at 12X trailing earnings per share.

That’s not screamingly cheap. In the old days (mid-1990s and earlier), hardware stocks used to trade between 8X-12X earnings, and Dell, HP, and other companies are now trading there again.

Unlike HP, Dell, et al, Apple is still a very healthy company, so if Apple ever gets to 8X earnings, it will be screamingly cheap.

But at 12X earnings, Apple is at least reasonably cheap–cheaper, for example, than the stock market as a whole.

And Apple also has $125 billion of cash.

Factor out that cash, and the business itself is actually getting close to trading at the Dell and HP level.

CHINA Sales – Not So HOT

Apple shares fell 3.9% in early trading on Friday after the launch of its iPhone 5 received a frosty reception in China, and two analysts cut shipment forecasts.

It was a dramatic contrast to the scenes at the iPhone 4S launch in January when an angry crowd pelted the store in Beijing with eggs and fights broke out between would-be touts aiming to resell new phones.

On Friday there was one person waiting at Apple’s store in Shanghai’s financial district before it opened. But the lack of queues may have been down to the online lottery scheme introduced by Apple to prevent a repeat of January’s chaos. It used the same method earlier this month for the launch of its iPad mini, and enforced a two-per-person limit.

Although the company has 300,000 pre-orders for the phone from China Unicom, one of the three big mobile providers, and will also sell it through mobile company China Telecom, it has still not sealed a deal with China Mobile, the biggest player with 703 million users of whom 79m are 3G (ie smartphone) users. Despite years of talks, the two sides have disagreed on revenue splits and business models.

That means Apple is unable to increase its shipments there as fast as the market for smartphones is growing. There are already 290 million smartphone users and that is forecast to double in the next 12 months.

Nokia’s shares rose earlier this month after it tied up a deal to sell its Lumia smartphones through China Mobile.

Even so, China Mobile announced in March that an estimated 15 million people use iPhones on its network, despite their being incompatible with its data services.

More broadly, But Apple and Nokia are struggling in the face of competition from devices powered by versions of Google’s Android software: those make up roughly 90% of the smartphones sold in China, although many connect to Chinese services rather than Google’s.

“In absolute terms, this (iPhone 5) launch will certainly result in strong sales for Apple in China. However, in relative terms, I don’t believe it will move the needle enough in market share,” Shiv Putcha, a Mumbai-based analyst at Ovum, a global technology consultant, told the Reuters news agency.

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