Thursday, January 24, 2008

Stocks for January 28, 2008

Quite the roller coaster this week. But our list continues, for your reading and trading pleasure.

An interesting facet of the weekly filter data is that we no IBD Supply/Demand companies. In other words, there was little institutional buying last week. Also, I noticed that the IBD rankings were significantly lower than last week. Stocks that were rated A were bumped to B, and those at B were bumped to C. (Those rated B or C will not appear below.)

SymbolBB Zacks PEG SuppDem VLIBD Stock checkup
LIFC112
1A+
ESRX111
1A
BIDU112

A+
CME112

A+
DE1
1
1A+
GME
11
1A+
MATK111

A+
MOS1
1
1A+
ORCL1
1
1A+
POT1
1
1A+
SWN1
2
1A+
TISI111

A+
TNE111

A+
VIP111

A+
AMTD111

A
APOL
12
1A
CLB1
1
1A
FLS1
1
1A
NDAQ1
1
1A
STRA1
2
1A
FLR1
1
1A-
IVGN
12
1A-
WFR
11
1A-


I added three companies to the core list and dropped four. TD Ameritrade (AMTD) is a discount broker. Oracle (ORCL) is that big database company that Microsoft can't seem to dislodge. MEMC Electronic Materials (WFR) produces wafers for the semiconductor industry worldwide. I suppose the stock symbol refers to "wafer."

SYNA, KCI, LOGI, and SXE have been dropped from the core list.

Core list (with n of 10 weeks passing):

SymbolPassing weeks Earnings
ESRX10
FLS10
LIFC10
MOS10
NDAQ10
VIP10
AAPL9
GOOG9
NOK9
NOV9
ACO9
ISRG8
PCLN8
PCP8
CLB8
DE8Div 31-Jan
BOOM7
AG7
AMZN7Earn 30-Jan
GME7
JASO7Split 8-Feb
VMI7
CNH6
OTEX6
RIMM6
SPWR6
CF6
FTI6
MATK6
BGC5
PSEM5
SLB5
AMTD5
ORCL5
WFR5


While the US markets took off Monday for the Martin Luther King holiday, foreign stocks tumbled. Not to be outdone, the US futures had a huge selloff before the market open on Tuesday, with the Dow expected to fall around five hundred points. The Fed swooped in with a rate cut, and gave investors the confidence to pare the losses to 150 points. Wednesday saw a swing from 300 points down to 300 points up.

Pundits are changing their tune from asking if a recession will happen to wondering if we're already in it.

Just to remind you, a recession is "called" by the National Bureau of Economic Research (NBER). Here is their definition:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.Note that the news for whether we are in a recession will, by necessity, be delayed for several months as the data are gathered.

Bank of America and Wachovia both announced awful quarters, but jumped on the announcement. (If you want to know why, think of the Wall Street adage, "Buy the rumor, sell the news." In this case, speculators did the converse, knowing that bad news was coming. So they sold the stock in advance of bad earnings, and bought on the news.)

The condition that John Hussman described in his December 17 column is coming about:

That would be if we see a relatively uninterrupted series of declines that breaks cleanly through the August and November lows, followed by a one-day advance of 200-400 Dow points.

I am not sure if Wednesday qualified for the one-day advance, but it certainly seems to. I was thinking that the market might rally to its 20-day moving average, but I am going to let it tell me what it's doing, rather than me call the shots.

Here is a graph of the CBOE Volatility Index, known by its symbol, VIX. You can see that it touched this volatility in August of last year, when the market was in a sharp downdraft. Since the volatility of the market is so high, it would make sense to sell options. I think a bearish call spread would make sense at this point. That would entail selling a call above the current price and buying a call further out for protection.

I hope you're having fun. I feel like I'm just beginning to figure out how the puzzle pieces fit together. Trade well!

Thursday, January 17, 2008

Stocks for January 21, 2008

Another difficult week for the markets. Here's the weekly list.


SymbolBB Zacks PEG SuppDem VLIBD Stock checkup
ESRX111 1A+
LIFC112 1A+
FLS111 1A
NOV111 1A-
AMTD111 A+
BIDU112 A+
CF1 11 A+
DE1 1 1A+
MATK111 A+
MOS1 1 1A+
ORCL1 1 1A+
POT1 1 1A+
SWN1 2 1A+
TNE111 A+
VIP111 A+
AAPL1 2 1A
ACO1 1 1A
AG1 1 1A
CLB1 1 1A
GOOG1 1 1A
JASO111 A-
NDAQ1 1 1A-
NE1 1 1A-
NOK 11 1A-


Martek Biosciences is new to the core list. It sells novel products from microalgae, fungi, and other microbes (yum!). It sells a vegetarian source of the omega-3 fatty acid DHA for use as a vitamin supplement.

Core list (with n of 10 weeks passing):

SymbolPassing weeks Earnings
AAPL10
ESRX10
GOOG10
LIFC10
MOS10
NDAQ10
NOK10
NOV10
VIP10
FLS10
ISRG9
PCLN9
PCP9
ACO9
BOOM8
CLB8
CNH7
GME7
RIMM7
SPWR7
AMZN7Earn 30-Jan
OTEX7
VMI7
AG7
DE7Div 31-Jan
JASO7Split 8-Feb
BGC6
PSEM6
SLB6
FTI6
CF6
KCI5
LOGI5Earn 17-Jan
SXE5
SYNA5
MATK5


The IBD is agreeing with me that the markets are in a correction. Most of the major indices are below their 200-day Simple Moving Average. While I believe the stocks on the core list to be among the best from which you can choose, their price movement is largely influenced by the movement of the market, which is dismal.

The market is waiting with bated breath to see not if, but by how much Fed chair Bernanke will cut rates. As I write, he is testifying before Congress, and the news is not good. He is urging Congress to pass a stimulus package, and quickly. (It reminds me of the medical shows when they keep on zapping the patient with a flat ECG. After the third or fourth try, one of the doctors has to "call it," that is, declare the time of death.)

In 2002, before he was nominated to the august position, he had given a speech about deflation in Japan, and how to prevent it from happening here. He also came up with a colorful analogy: If a helicopter came and dropped on each person the cash they already owned, doubling the number of dollars they had in their possession, then all prices would double the next day.

I remain skeptical that anyone would be able to reverse fiscal and monetary excess, especially the central bank that caused the latter. I will try to post a list of short candidates soon.

Saturday, January 12, 2008

Bonus question about home prices

An economics professor forced his grad students to do a lot of research of house prices (the terms grunt work and slave labor come to mind), and the Case-Shiller index was born. The index measures different housing markets (e.g., Atlanta, New York, Charlotte) and compares the price of willing buyer and a willing seller for a certain configuration of house. You can read about it at this Standard & Poor site.

I have selected a handful of markets (and included Charlotte).



Charlotte is the one at the bottom, with a slow rise from 73.32 in Jan '91 to 133.98 in Dec '07. There is a composite of 20 markets thrown in for good measure. You may click on the image to get a bigger picture. I created the graph by downloading the Case-Shiller Historical Values and playing with Excel.

OK, now here are a few questions for you.
  1. Which market had the highest rise?
  2. When did it peak?
  3. Are any of the markets still rising?
  4. If this were a technical chart of stock charts, which ones would you buy?
  5. Which ones would you sell short?

Stocks for January 14, 2008

That was one rough week! Here are the stocks from the weekly list that passed at least three filters.


SymbolBB Zacks PEG SuppDem VLIBD Stock checkup
ESRX111
1A+
NOV111
1A+
FLS111
1A
GME111
1A
LIFC112
1A
SPWR111
1A
NOK111
1A-
BIDU112

A+
CF1
11
A+
CLB1
1
1A+
DE1
1
1A+
MA
111
A+
MOS1
1
1A+
NDAQ1
1
1A+
ORCL1
1
1A+
POT1
1
1A+
SWN1
2
1A+
VIP111

A+
AAPL1
2
1A
ACO1
1
1A
AG1
1
1A
AMTD111

A
AMZN1
1
1A
ARTC
12
1A
CNH1
1
1A
ESV111

A
GOOG1
1
1A
ISRG1
1
1A
JASO112

A
MATK111

A
PCLN1
1
1A
PCP1
1
1A-
RIMM1
1
1A-
WFR
11
1A-
WMB
12
1A-


This week, we see the departure of DO and TISI from the core list. CF Industries (CF) distributes fertilizers, such as ammonium nitrate and various nitrogen fertilizers. As a side note, it is interesting how many agriculture stocks have gotten on the core list of late. Could this be a fallout from ethanol manufacture?

Core list (with n of 10 weeks passing):

SymbolPassing weeks Earnings
AAPL10
ESRX10
GOOG10
ISRG10
LIFC10
MOS10
NDAQ10
NOK10
NOV10
PCLN10
PCP10
VIP10
BOOM9
FLS9
CLB8
CNH8
GME8
RIMM8
SPWR8
ACO8
SLB7
VMI7Div 14-Jan
BGC7
OTEX7
PSEM7
AMZN7Earn 30-Jan
KCI6
SYNA6
FTI6
LOGI6Earn 17-Jan
SXE6
AG6
DE6Div 31-Jan
JASO6Split 8-Feb
CF5


I am almost finished with one of my Christmas gifts, Financial Reckoning Day: Surviving the Soft Depression of the 21st Century by William Bonner with Addison Wiggin. The thesis of the book is:

  • The Fed can't fix every problem in the economy
  • We have spent ourselves deeply into debt, both fiscally and personally,
  • The population is getting older and will stop spending like drunken sailors,
  • In the past, this has caused protected recessions (as recently as Japan a couple of years ago).
Really cheery reading. But at least they write in an amusing and engaging way!


The scenario I described is unfolding: the Nasdaq and Dow are making a double bottom at their lows from last summer. There will be a possible penetration of these lows, a possible sucker's rally of 200-400 Dow points, and then a fall in earnest. Stay sharp and be willing to cut losses, hold cash, or go short.

Friday, January 4, 2008

Stocks for January 7, 2008

Hope you had a happy new year. Ours was a quiet one at home, watching movies with the kids. Here are the stocks from the weekly list that passed at least three filters.


SymbolBB Zacks PEG SuppDem VLIBD Stock checkup
AAPL1 211A+
ESRX111 1A+
FLS111 1A+
LIFC112 1A+
NOK111 1A+
NOV111 1A+
PCLN1 111A+
SPWR111 1A+
AMTD111 A+
AMZN1 1 1A+
BIDU112 A+
BOOM1 2 1A+
CF1 11 A+
CLB1 1 1A+
CNH1 1 1A+
DE1 1 1A+
DLLR111 A+
GME1 1 1A+
GOOG1 2 1A+
ISRG1 11A+
JASO112 A+
MA 111 A+
MOS1 1 1A+
NDAQ1 1 1A+
ORCL1 1 1A+
PCP1 1 1A+
RATE11 1 A+
RIMM1 1 1A+
SWN1 2 1A+
VIP111 A+
ACO1 1 1A
AG1 1 1A
BBY1 2 1A
CME112 A
DECK 211A
MATK111 A
STRA1 2 1A
VMI1 1 1A
WFR 11 1A
ARTC 12 1A-


This week, we have three stocks on (AG, DE, and JASO) and three stocks off (ICLR, NVDA, and SIGM). Agco (AG) manufactures and distributes agricultural equipment and related replacement parts, world-wide. Deere (DE) does the same. Ja Solar Holdings (JASO) manufactures solar cells and is based in China.

Core list (with n of 10 weeks passing):

SymbolPassing weeks Earnings
AAPL10
ESRX10
GOOG10
ISRG10
LIFC10
MOS10Earn 9-Jan
NOK10
NOV10
PCLN10
PCP10
VIP10
BOOM10
NDAQ10
SLB8
CLB8
CNH8
GME8
RIMM8
SPWR8
VMI8Div 14-Jan
FLS8Div 8-Jan
SYNA7
BGC7
KCI7
OTEX7
PSEM7
ACO7
SXE6
FTI6
LOGI6Earn 17-Jan
AMZN6Earn 30-Jan
DO5
TISI5
AG5
DE5Div 31-Jan
JASO5


January has started out much lower, so the short positions and short calls are of course doing well.

The scenario that may occur (and my crystal ball is often wrong) is to have some resistance at this point (Nasdaq and Dow are making a double bottom), penetrate through the reistance, rally 200-400 Dow points, and then fall in earnest.Stay sharp and be willing to cut losses, hold cash, or go short.