Stock Market Analysis: 04/30/10

  • The Dow Jones Industrial Average ( DJI ) closed at 6547 on 3/9/09, as the trendy boutique market went on another roller coaster ride today. I am so pleased to have coffee again today with some of the traders and I was so pleased to see $36,400 profits made from an entry price of $1.40 to now closing price of $2.00. IF AIG can close above $15, you could see a quick surge back to $17 per share but this is the area where i'd be selling. I believe that this is setting up to be a classic contrarian value play, which can be defined as putting on a position that makes you distinctly uncomfortable. When hunger strikes, you can give them a healthy, homemade snack instead of buying something unhealthy at a vending machine or fast food restaurant. Factors that motivate those buying stocks include things that impact production, public perception and overall profitability.

     

    If the stock continues to close below $15.62, there is really no major support until $14 which would then be a great buying opportunity. As this chart from Factset shows, stock prices have been highly correlated with consensus forward 12 month EPS estimates. The 10 month cycle in copper price bottoms says that a bottom is due imminently. Stronger-than-forecast U.S. jobs data on Nov. 6 backed up the case for the central bank to boost its benchmark rate from near zero at its meeting next month. Discovery Laboratories, Inc. (Nasdaq:DSCO) has received written notification from the U.S. Antigenics Inc. (AGEN) - AGEN stock made a double top around the $3.30 level and then sold off. Dearborn Bancorp Inc. (DEAR) - Shares of Dearborn Bancorp Inc. continue to be very volatile and a stock worth watching. YRC Worldwide Inc. (YRCW) - YRCW continues to struggle over $4. FAS has now failed 4 times in the mid to high $49's over the past week and is starting to trade lower. Now that oil prices have tanked and energy companies having a progressively higher weight in the HY market, defaults in energy have the potential to push this market over the edge.

     

    These are stocks like utility companies that are not affected by the market downturn or companies that sell their products during all economic conditions. This 20-year relative performance chart of energy stocks to the SPX show that energy is testing a relative support zone with signs of positive RSI divergence. The "normal" way of playing a late cycle expansion is to rotate into the deep cyclical sectors, such as energy and mining. This value investment theme was reinforced by the news that billionaire and deep value investor Seth Klarman had bought a 53 million share stake in Alcoa. When that washout eventually comes, there will likely be some big geopolitical or economic news to justify the selloff, and to help facilitate the washout selling wave. There is also the pride of being one of the few pointed shares-specific programs in the market. Despite these negative signals from the bond and credit markets, I am not ready to hit the panic button yet, as there is no sign of a recession on the horizon.

     

    A rebound in the bond market’s inflation view would signal rising investor confidence in the Fed’s ability to increase interest rates without derailing the economy. Yield spreads are rising across all credits, from investment grade to high yield. Dividend yield is 5.4% paid monthly and there’s more room for dividend growth since their payout ratio is dropping consistently. If you study his method in detail his winning formula was small float and 100% plus EPS growth. A saucer-with-handle follows the same rules as the cup-with-handle and is described in detail above. Baidu, Inc. (BIDU) - Shares of Baidu, Inc. broke out above $90 on Tuesday. The 10-year break-even rate hasn’t traded at 2 percent since October 2014, when crude oil was above $90 a barrel, compared with about $42 Thursday. A turnaround in the inflation measure could happen quickly because the gauge is so low compared with where the bank assesses fair value -- a statistically rare two standard deviations away -- according to Ardagna.

     

     

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