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Sentiment Shifts As Traders Take Profits

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 1

Oil continued to surge higher this week, but it was a different story for the overall market as traders began to lock in profits following an impressive surge off the March double bottom. 

I talk about this quite a bit here, but it’s worth repeating.  At market bottoms, the sentiment begins to shift as traders look for just about any positive news to rally as the bad news gets fully priced in.  Near market tops (or after sustained runs), you’ll notice a shift in the opposite direction as traders look for an excuse to take profits.  No longer does the good news spark a rally because it’s been largely priced in.

On Monday evening I sent the following to my members (you can receive these reports by signing up at the left)

"It was fairly subtle but did you notice it today?  Perhaps a shift in sentiment is underway.  I’ve began discussing the shift in sentiment after the Bear Stearns bailout to a more bullish tone.  That is, the
market seemed to be beginning to focus on the positives, looking for any glimmer of daylight to rally.  It was time to begin adding on the long side.  BUT, the action today revealed a possible reversal to
increasingly bearish sentiment.  Over the past several weeks the market rallied on any economic news that was "better than expected".  What happened today?  That non manufacturing ISM index
came in better than expected and well ahead of last months reading (49.6) at 52 which indicated expansion.  While the market surged initially, it quickly wore off and the indices never recovered.  A
few weeks ago, it probably would have been enough to kick start AND sustain a rally.  This isn’t a clear indication that this rally is coming to an end, just a small clue.  Considering today’s selling volume came in on the light side, it’s considered a healthy day of consolidation keeping the bulls in charge for now.  However, I’m still playing it cautiously and trading only in the very short term. As further indication that the end of the rally is very near, be on the lookout for a day of distribution.  I think we are close to that."

That was clue number 1 that perhaps the market was stalling out.  Then came Wednesday and the big day of distribution.  It’s important to remember that one day of distribution won’t kill a rally.  After the run up we’ve had, it’s not unusual to have a big day of selling like that.  However, it’s also important to remember that this is still a bear market that’s to be respected, not to mention we’re heading into what is notoriously one of the worst months for the market.  After a bear rally like that why not lock in a good portion of those gains?

On Wednesday evening I sent the following to members:

"A couple days ago I mentioned that the market provided a subtle clue that perhaps the rally was coming to an end by not rallying after a positive ISM report.  Today, the market provided a much bigger clue that the rally is coming to an end with a big day of distribution as the Dow was unable to take out resistance of the 200 day moving average.  It was the first day where sellers really exerted some control since April 11th, when GE reported awful results. 

There really wasn’t a glaring catalyst that induced today’s selling.. Oil approaching 125/barrel will certainly stoke inflationary fears and put further strain on an already strapped consumer and I don’t think the market has fully priced those concerns in.  Outside of that and a weak pending home sales
number, this was probably more of a technical sell off.

Volume wasn’t through the roof on the sell side today, but it was considerably heavier than the day before and sets us up for additional weakness in the coming days.  Just how far the market pulls back is very difficult to get a read on after just one day.   We’ll have to keep an eye on support levels and the amount of sell volume on down days.  The next areas of support and likely test areas for the indices are Dow 12700 (upward trend line & previous highs), Nasdaq 2400 (april high) and S&P 1385 (upward trend line).  If we take out these levels (which I think is quite likely), we’re most likely headed down to test the 50 day moving averages.  Testing this moving average would be roughly a 50% retracement of the rally off the March bottom and an area where I’d be looking to get more aggressive on the long side once again. 

I closed out most of my long positions last week and two more today.  I’m sitting on 50% cash, 25% long and 25% short."

Currently, both the Dow and S&P are sitting right on their upward trend lines but probably poised to break through.  Let’s take a closer look…

The S&P as you can see sits right on that line, but give the distribution we saw Wednesday I really think we break through that level and ultimately test the 50 day moving average at some point.  I probably won’t get more aggressive on the long side until we get down to those levels.  Some people are even calling for a retest of the lows of the correction but in my opinion we don’t get down that far again.  I do think that double bottom is a long term bottom for the market.  We’ll see. 

51008_sp500

Notice how the Dow tested major resistance of the 200 day moving average on several occasions and was unable to bust through.  That was another signal that the market was tiring.  It’s no coincidence that that was the barrier in the Dow.  We now turn our attention to support levels for an indication of how far this pull back will go.  The Dow did hold at the upward trend on Friday, but again, I just don’t think this is the end of the pull back and the Dow soars to new heights.  A test of the 50 day moving average seems more likely. 

51008_dow

The Nasdaq never quite tested that 200 day moving average, but did have trouble with psychological resistance at 2500 and appears headed to test the upward trend line in the 2400 range. 

51008_naz

The bottom line is that this is no time to be aggressive on the long side, but I don’t think it’s necessarily a  good time to be aggressive on the short side either.  If you’re not a shorter term trader trying to take advantage of some of these moves in solar, china and oil plays it’s probably best to sit on cash for awhile as we get further into May. 

::: Model Portfolio :::

** This section will now appear as a separate report about every other Wednesday. 

The Self Investors Model Portolio wrapped up 2007 with a 30.2% gain.  Would you like to receive buy and sell alerts within minutes (NEW! now get them via instant messaging in near real time) of each transaction in the portfolio?  You can receive these along with ALL of the tracking tools and reports with the very popular Gold membership.  Don’t delay, get started today and join me for many more highly profitable months here at SelfInvestors.com.

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Oil & Gas Equip & Services: 7.70%
2. Industrial Equipment Wholesale: 7.45%
3. Industrial Metals & Minerals: 7.25%
4. Oil & Gas Drilling & Exploration: 5.55%
5. Independent Oil & Gas: 5.55%
6. Gold: 5.40%
7. Silver:  5.30%
8. Metal Fabrication: 4.90%
9. Heavy Construction: 4.40%
10. Specialty Chemicals: 3.85%

– Top 10 Worst Performing Industries For the Week –

1. Major Airlines: -11.40%
2. Drugs – Generic: -11.05%
3. Banks – SE: -8.85%
4. Drugs – Related Products: -7.90%
5. Building Materials Wholesale: -7.90%
6. Regional Airlines: -7.80%
7. Investment Brokerage: -6.65%
8. Education & Training Services: -6.55%
9. Department Stores: -6.50%
10. Home Improvement Stores: -6.40%

– Top 5 Best Performing ETFs For the Week –

1. Market Vectors Russia (RSX) 10.05%
2. United States Oil (USO) 9.35%
3. US Natural Gas (UNG) 8.15%
4. SPDR Oil & Gas Equip & Services (XES) 7.30%
5. iShares S&P Commodity Index (GSG) 7.30%

– Worst 5 Performing ETF’s –

1. HOLDRS Internet Infrastructure (IIH) -30.30%
2. Greater China Fund (GCH) -10.90%
3. Morgan Stanley India (IIF) -10.05%
4. India Fund (IFN)  -9.15%
5. Ishares Home Construction (ITB) -8.60%

:::  IPO’s Worth Watching for This Week :::

This section will now appear as a separate post on Mondays.

While 2008 should be a much slower year for IPO’s considering the deterioration of the market, there will continue to be some good companies coming to market here and there.  I’ll be highlighting the best IPO’s every Monday.

::: Upcoming Economic Reports (5/12/2008- 5/16/2008) :::

Monday:        Treasury Budget 
Tuesday:       Retail Sales, Export/Import Prices, Business Inventories
Wednesday:  CPI, Crude Inventories
Thursday:      Initial Claims, Capacity Utilization, Industrial Production, Philly Fed
                      Construction Spending, ISM Index
Friday:           Building Permits, Housing Starts

::: Earnings I’m Watching This Week :::

Monday:
XFMedia (XFML)

Tuesday:
Applied Materials (AMAT), Cameco (CCJ), Canadian Solar (CSIQ), Gushan Environmental (GU)

Wednesday:
China Digital TV (STV), Ctrip.com (CTRP), Deere (DE)

Thursday:
Hewlett Packard (HPQ), Urban Outfitters (URBN)

Friday:
Abercrombie & Fitch (ANF)

::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::

1. Visa (V) Vs. Mastercard (MA): Earnings Results

2. Peak Oil, Peak Water.. We’re All Gonna Die

3. Selling in May Is Not a Bad Strategy

4. Colfax (CFX) & Real Goods Solar (RSOL) IPOs Begin Trading

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Gold Heading Lower, Natural Gas & Uranium Headed Higher? Transports Showing Leadership

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 0

Not much has happened with the major indices since my last report, so for the weekly report I thought I’d go ahead and take a look at a few ETF’s. 

Gold, specifically the iShares Comex Gold Trust (IAU), has taken out an accelerated trend line from last summer and appears headed to the next level of support at the longer term trend line around 75 – 80.  The long overdue correction is underway.

4508_iau

While Gold undergoes a correction, so too has the PowerShares Metals Fund (DBB) which is comprised mostly of copper, aluminum and zinc futures.  It had a tremendous run at the beginning of the year up to major resistance around the highs of last April.  It’s digested those gains in a healthy manner and is finding support around the 50 and 200 day moving averages. 

4508_dbb

Natural gas has been red hot in 08, running up nearly 50% and is now digesting those gains.  Natural gas hasn’t had nearly the run that oil has and might soon offer a  good entry point for the long haul as it pulls back to the breakout point of a double bottom base.

I4508_ung

Is uranium/nuclear the next commodity/energy play to run?  That appears to be the case as it carves out the bottom of a double bottom base. 

4508_nlr

Transports, particularly trucking and railroads have done extremely well and several stocks in this space have been breaking out. Notice the Ishares DJ Transportation Fund (IYT) has begun a new uptrend.

4508_iyt

The US real estate sector has been improving, but for the long haul I like the potential of international real estate much better.  A good, diversified way to play it is with the SPDR Intl Real Estate Index (RWX), which has cleared a downtrend. 

4508_rwx

Remember the semis?  You don’t hear much about this sector anymore and with the semis still confined within a 4 year channel, it’s easy to forget about.  The Semiconductors Holders Trust (SMH) hit a nearly 4 year low in January and has cleared a short 5 month downtrend, paving the way for a test of the next level of resistance around 32 in the coming weeks/months.

4508_smh 

::: Model Portfolio :::

** This section will now appear as a separate report about every other Wednesday. 

The Self Investors Model Portolio wrapped up 2007 with a 30.2% gain.  Would you like to receive buy and sell alerts within minutes (NEW! now get them via instant messaging in near real time) of each transaction in the portfolio?  You can receive these along with ALL of the tracking tools and reports with the very popular Gold membership.  Don’t delay, get started today and join me for many more highly profitable months here at SelfInvestors.com.

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Investment Brokerage: 39%
2. Education & Training Services: 19.85%
3. Semiconductor – Memory Chips: 16.90%
4. Processing Systems & Products: 11.60%
5. Manufactured Housing: 11.40%
6. Industrial Metals & Minerals: 11.00%
7. Credit Services:  10.05%
8. Residential Construction: 10.05%
9. Mortgage Investment: 9.50%
10. Copper: 9.30%

– Top 10 Worst Performing Industries For the Week –

1. Consumer Services: -.95%
2. Auto Manufacturers: -.70%
3. Food Wholesale: -.50%
4. Networking & Communication Devices: .10%
5. Business Equipment: .10%
6. Drug Stores: .20%
7. Medical Practitioners: .20%
8. Healthcare Info Services: .40%
9. Silver: .50%
10. Beverages – Soft Drinks: .55%

– Top 5 Best Performing ETFs For the Week –

1. Herzfeld Caribbean Basin (CUBA)  14.65%
2. iShares Home Construction (ITB) 13.80%
3. SPDR Homebuilders (XHB) 13.10%
4. Claymore China Real Estate (TAO) 11.85%
5. SPDR Metals & Mining (XME) 9.85%

– Worst 5 Performing ETF’s –

1. US Natural Gas (UNG) -5.15%
2. iPath India (INP) -3.75%
3. Indonesia Fund (IF) -3.05%
4. Malaysia Fund (MAY)  -2.95%
5. iShares Malaysia (EWM) -2.40%

:::  IPO’s Worth Watching for This Week :::

This section will now appear as a separate post on Mondays.

While 2008 should be a much slower year for IPO’s considering the deterioration of the market, there will continue to be some good companies coming to market here and there.  I’ll be highlighting the best IPO’s every Monday.

::: Upcoming Economic Reports (4/7/2008- 4/11/2008) :::

Monday:        Consumer Credit
Tuesday:       Pending Home Sales, FOMC Minutes
Wednesday:  Wholesale Inventories, Crude Inventories
Thursday:      Trade Balance, Initial Claims, Treasury Budget
Friday:            Export/Import Prices, Mich. Sentiment

::: Earnings I’m Watching This Week :::

Monday:
Alcoa (AA)

Tuesday:
Chattem (CHTT)

Thursday:
FCStone Group (FCSX), Genentech (DNA)

Friday:
Fastenal (FAST), General Electric (GE)

::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::

1. ETF’s Showing Greatest Demand: iShares Taiwan (EWT) Breaks Out

2. Insider Buying at Ceco Environmental (CECE) Signals Another Big Run?

3. Put PUTs To Work As Insurance Against Disintermediation

4. Market Breaks Out But Volume Suspect; Stock of Day – AsiaInfo (ASIA)

5.
Visa (V) Breakout From Bullish Triangle

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The World’s Best Real Estate Value

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 2

The following essay was written by Steve Sjuggerud of DailyWealth.com which I received from DailyWealth.com the morning after I wrote about CRESY (bottom of post).  I found it to be an interesting read and a nice supplement to my comments on the company.  Note that the stock moved over 20% following the release of this email.  Not sure what the circulation is of Dr. Sjuggerud newsletter (I’m guessing in the 10’s of thousands), but certainly the positive comments had some affect on the stock.  At this point I’d look for it to come in a bit and touch down to 16 before heading higher.  I do not own shares of CRESY but am considering a position.

**************

These shares are comically cheap…

If you had a billion dollars, you couldn’t put together a better real estate portfolio than Cresud’s… and yet the market value of Cresud’s stock is less than $250 million.

To me, Cresud is the world’s best value in real estate. The nice part is, Cresud trades on the Nasdaq, so you can buy and sell this fantastic real estate portfolio whenever you want.

I first told my True Wealth readers about Cresud in November of 2003. I came up with a “rough value” of the assets back then of about $800 million. I told my readers that Cresud was worth $30 a share, and that we’d take our profits at $25. So far, the stock has only risen from $11 to $14.

Yet the value of their real estate has soared.

Remember… I thought Cresud was worth $30 a share back in 2003. Since the value of real estate has soared since then, Cresud has to be worth over a billion dollars today. Yet the market value is less than $250 million. Why is it so cheap? How has everybody missed this one?

The reason everybody has missed Cresud – even though it trades on the U.S. stock market – is the company is based in Argentina.

Cresud is a massive land owner in Argentina. When I first wrote my story, I here’s how I valued Cresud:

$320 million in commercial property
$350 million in farmland (1.1 million acres)
$130 million in cows, crops, and cash
= $800 million

I know this business as well as anyone. I’ve traveled out to Cresud’s farms. I’ve stayed in their hotels (the Llao Llao in Patagonia is just incredible: www.llaollao.com). I’ve visited their shopping centers. I’ve stood on their land to be developed. I’ve been to their office buildings.

Getting to know this business so well has cost a lot of time and money It’s worth it though… I can confidently confirm this is a great business with a huge amount of valuable assets.

It’s not just Cresud’s land holdings I’ve become so familiar with. I’ve also gotten to know the guys who run the company.

I didn’t mean to, but with so many trips down here in the last three years, I’ve become friends with these guys. They’re exceptionally bright people who understand how the world works, and how to make money.

Over the last 15 years, these guys have put together a portfolio of Argentina’s very best properties. They managed to buy nearly all of them at fire sale prices too.

Right now, I’m in Argentina again, looking for investment opportunities. A few weeks ago, I started crunching some numbers looking for the cheapest stock markets in the world. Thailand and Argentina came out near the top of the list. So I headed back down here.

I love this place. Yesterday, while walking around the stunning Recoleta neighborhood in downtown Buenos Aires with Porter Stansberry and Doug Casey, Doug called Buenos Aires the “most European city in the world these days.”

I have to agree with him. We just arrived yesterday, and it was 75 degrees, with not a cloud in the sky. You couldn’t dream up a nicer day.

Argentine stocks and real estate are very cheap. We plan to fly around the country looking at real estate, and we’ll meet with some companies that look pretty interesting (but only trade on the stock exchange down here).

However, with shares of U.S. traded Cresud so cheap right now, you don’t have to look any farther to play this cheap market. By buying Cresud, you can buy Argentina’s “trophy” properties with excellent managers at fire sale prices. Right now, why do it any other way?

Cresud trades on the Nasdaq under the symbol CRESY. It’s web pages are www.cresud.com.ar and www.irsa.com.ar.

The shares are definitely worth checking out.

Good investing,

Steve

*******************************

While I don’t have time to read all of Steve’s newsletters, the one’s that I have had a chance to read I have been impressed with.  I receive no incentive for recommending this newsletter, just thought I’d pass along a good source of investing info : )

DailyWealth is a free e-letter focused on the world’s best contrarian investment opportunities.  To begin receiving a free subscription, click here.

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A Weight Has Been Lifted

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 2

It’s going to take some effort to take the emotion out of this post but here goes…

I wanted to discuss an upcoming change here at the blog and the reason why I would create such a headache for my readers.  Apparently some time ago, Investors Business Daily decided it was no longer acceptable for other websites to mention that they use the CANSLIM method or components of the method for stock selection.  Several months ago I received an aggressive cease and desist letter from Investors Business Daily claiming trademark infringement with the use of CANSLIM as well as the use of “investors” in my www.selfinvestors.com domain.

Fortunately, taking on a major corporation in court was averted and the legal weight around my neck lifted when we came to a settlement agreement out of court.  As a result of the agreement, I keep www.selfinvestors.com as is, but have agreed to remove all mentions of IBD, Investors Business Daily and CANSLIM from my sites.

As a result, I will need to change the main folder at the blog from /canslim_investing/ to something else.  No big deal right?  Well, actually it’s a major headache because of the way other sites have linked to the blog (linking to http://investing.typepad.com/canslim_investing/ rather than http://investing.typepad.com and how the RSS feeds are created.  Basically what happens is all links coming into the site will now be broken and all subscribers to the RSS feed will no longer receive the updates after the folder name is changed. 

On March 17th, the change will be made.  Once that change is made you’ll need to re-subscribe to the RSS feed if you’d like to continue receiving blog updates to your RSS reader.  I’ll be sending a reminder out on the 17th with specific instructions.

If you are a blog owner and currently link to the site, your help in getting this blog back on its feet by changing your incoming link is greatly appreciated.

I’m looking forward to putting this behind me, moving on and focusing on what matters.. and that’s helping self investors navigate the market.

My goal for the rest of 2006 – to stay away from doctors and lawyers (no offense Cindy 🙂

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Top 10: Companies/ News Stories

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 0

I came across a couple interesting top 10 lists last night I thought I’d share here.  The first is the Forbes Top 10 Small Cap companies.

1.  Hansen Natural (HANS): monster energy drink
2. Cognizant Tech (CTSH): Indian outsourcer
3. Travelzoo (TZOO): online travel
4. Remington Oil (REM): oil and gas exploration, Gulf of Mexico
5. USANA Health Sciences (USNA): vitamin MLM company
6. Forward Industries (FORD): carrying cases for Motorolo Razr cell phone
7. Laserscope (LSCP): non invasive cosmetic procedures
8. Ceradyne (CRDN): body armor
9. American Healthways (AMHC): specialty medical services
10. Middleby (MIDD): commercial kitchen equipment, McDonald’s, KFC and Papa John’s

I would have to also add True Religion (TRLG), Infosys (INFY), Quality Systems (QSII), Google (GOOG) and Franklin Resources (BEN)

Here’s another Top 10 list for good measure.  It’s the the Street.com’s top 10 stories of last week.

1. Just Ahead: Dow 40,000?
A new breed of mega-bulls sees a monster-sized rally soon — here’s why they’re so optimistic.

2. Sea Change at Nortel
Admiral Bill Owens steps aside for Motorola veteran Mike Zafirovski.

3. Apple’s Next Big Thing
Above all, the expectation of future hot products will drive the company’s stock, say analysts.

4. Buy the Dip, Get Clipped
Traders eager to pounce on Apple-induced weakness quickly find themselves under water.

5. Bottom Drops Out of Nasdaq
Higher volume and a downside break spell more trouble. Plus charts of retail HOLDRs, Federated and more.

6. ‘RealMoney’ Radio Recap: Bottom’s Up? 
Market negativity is reaching its peak, says Cramer. Also, strong on Mister Softee.

7. Cramer’s ‘Mad Money Lightning Round’: Don’t Tax H&R Block
Cramer doesn’t understand the ‘opprobrium’ for this stock.

8. Biotech Ready to Deliver
Investors will soon see if their confidence is well-placed.

9. Cramer’s ‘Mad Money’ Recap: Riches in Cheap Threads
Cramer likes TJX, owner of T.J. Maxx and Marshalls discount retailers, when the consumer feels pressured.

10. Top Line Bruises Apple
The company beats earnings estimates, but investors focus on light revenue and iPod shipments.

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CNN/Money Top Financial Blogs

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 2

Thank you Carrie Lee and CNN/Money for recognizing the blog here as a Top 10 Financial blog.  It’s greatly appreciated. 

3. CANSLIM Investing – Yes it’s a long web address, but also worth bookmarking. This site contains many easy to read pieces on stock suggestions, chart analysis, and market commentary using the CANSLIM approach to investing. (The seven letters each stand for an investing criteria, for example, "L" represents choosing an industry leader over a laggard.)

…..

Congrats to the other fellow bloggers who were mentioned in the article as well. Here’s a link to the full article:

http://money.cnn.com/2005/10/06/markets/financial_blogs/index.htm

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Doggone, what will they think of next?

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 0

.. and I thought the brightest minds in this country were hard at work on the really important stuff like stem cell research, HIV, fuel cells, etc.  Nope, try "petworking".  Huh?  Had to pass this story along from Wired.

Collar Cultivates Canine Cliques

If you’ve ever longed for a way to monitor your dog’s social life, map out its buddy network and sense who its true friends really are, you might have been waiting for SNIF.

The Social Networking in Fur, or SNIF, project is a wearable computer system for dogs that allows their owners to monitor the animals’ behavior and capture their social networks.

The technology, designed by a group of researchers at MIT’s Physical Language Workshop, also gives dog owners the chance to "petwork," or network through their pets.

Link to the whole story.

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Bullish Action in Taser (TASR) Continues

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 0

Despite all the controversy over Taser’s stun gun, the action in the chart continues to paint a bullish picture and today’s action would indicate another significant price surge is in the works as the stock is breaking out of a symmetrical triangle formation with heavy volume.  The pattern of big buying followed by decreasing sell volume that began in March (see past posts on TASR for a closer look by clicking CANSLIM Stocks to the left) continues and indicates good demand for the stock.  (click image for larger display)

After the recent 2 for 1 stock split (which was the third in the last year), the increase in the supply of shares can create significant pressure in the stock price if the increase in supply isn’t tempered by a subsequent pick up in demand.  A company will split its stock to decrease the price, which in theory makes it more attractive to the average investor.  But it also makes it easier for institutions to initiate new positions or add to their current holdings.  A small float (supply of shares not held by insiders available for trading) may squeeze out institutions that would like to initiate a position or add to an existing one.  So, if the demand is there, the increase in supply can be beneficial.  Based on today’s action, that appears to be the case.

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