Monday, July 21, 2008

Stocks for July 21, 2008

For your trading enjoyment, here is the list for the week of July 21. It is comprised of stocks passing at least three of the five filters.

SymbolTop RankedZacks PEG SuppDem VLIBD Stock checkup
NOV111 1A+
MOS111 1A+
RIG111 1A
BUCY1 1 1A+
POT1 1 1A+
ESV 11 1A+
ARO 11 1A+
GDI 11 1A+
AXYS 12 1A+
JOYG 11 1A+
WAB 11 1A+
FLIR 12 1A+
CF  111A+
AAPL1 1 1A
PCLN 11 1A
RIMM 11 1A
HAL 11 1A
FLR 11 1A
SFY111  A-
MON 11 1A-
XLNX 11 1A-

ARO is back on the core list, having been off for a year. Aeropostale, Inc., is a clothing retailer at a mall near you. DVN is off the core list.

Core list (with n of 10 weeks passing):

SymbolPassing weeks Earnings
AXYS10Earn 22-Jul
BUCY10Earn 24-Jul
JOYG10Earn 4-Sep
MOS10Earn 28-Jul
POT10Earn 24-Jul
RIG10Earn 6-Aug
RIMM10Earn 25-Sep
ACI9Earn 25-Jul
MON9Earn 8-Oct
FLR9Earn 11-Aug
HAL9Earn 22-Jul
NOV9Earn 29-Jul
FTI8Earn 24-Jul
NBL8Earn 30-Jul
MA7Earn 31-Jul
SWN7Earn 30-Jul
KWK7Earn 6-Aug
ESV7Earn 24-Jul
GDI7Earn 23-Jul
MANT6Earn 30-Jul
BRY6Earn 30-Jul
GLW5Earn 30-Jul
KEX5Earn 23-Jul

moving down this week
moving up this week
new this week

Welcome to another interesting week of trading. The Dow went through some major gyrations, bouncing off of a W bottom and rallying. IMO (In My Opinion), it was a rally without a lot of conviction, based on the notion that the Fed and the Treasury will come to the rescue of the infamous twins, Freddie Mac and Fannie Mae.

I heard them descibed this morning as a very sick patient, needing more and more medicine. But the opinion did not include the possibility that they were pumping drugs into a pair of corpses.

Let's talk about the process, briefly. (This is an amateurish description, but then again, I'm an amateur!) Centura lent me some money for a mortgage in 2002. After doing so, they promptly turned around and sold the loan to Fannie Mae, picking up perhaps 75 basis points (3/4%) of the notes value for their effort. Fannie Mae took my note and sliced it into tranches of, say, 5-7 years and 8-10 years. Then Fannie sold them like bonds of 5-7 and 8-10 years, hinting that they were guaranteed by the Federal government. These, in turn, were wold to other corporations and municipalities who would have no idea that these may have been in Alt-A or subprime mortgages. Multiply the above by one million.

Everything is well and good until a large number of people default. This could easily happen because the amount borrowed on the whole is 102% of the value of the houses. (This is an aggregate for all of the US. I read it in a book by Bill Bonner. It was historically 50%; it indicates that we have been borrowing on equity lines and buying bigger houses.)

So the money is starting locally, moving federally, and ending up in the hands of far-off places like Norway and Malaysia.

The markets rallied when the Federal government agreed to take on the relatively worthless debt of Fannie and Freddie and back with the full faith of the US Government. We'll have to see how much confidence this restores, but it did put a halt to the diving financial market.

The Market remains in Red Light mode according to the 1-2-3 model. It has moved back to three-and-a-half stars in the inflation model ("Inflation Danger"), up from the "some inflation risk" of last week. We have seen a clearing rally, giving another opportunity to establish some protective short positions. Tread carefully.

No comments: