The morning began with big write downs out of UBS and Deutche and LEH needed to raise 4 billion to shore up its balance sheet. Once analyst called the UBS write down a "kitchen sink job", saying "It’s a kitchen sink job. They’ve separated all their toxic waste. If they’re going to finance that then everyone is saying this is the beginning of the end; this is the last capital increase."
Several weeks ago we’d probably be down a few hundred, but this is a different market than the pre Bear Stearns market. On that day of the BS debacle, the character of this market changed from one that focused on the bad news to one that rallied on any positives. The market always prices in future events and when the bad news flows day after day, week after week, eventually you hit a tipping point where it’s clear that much of it has been priced in. That’s why in the case of an individual stock, it rallies before a company begins reporting big earnings and sales growth numbers and falters well before the fundamentals crack. I’ve said it many times before here and I’ll say it again: stock charts are the best leading indicators.
We’ve been in this mode for a couple of weeks now and I think today was another good reminder of that, but was today as bullistic (I know it’s not a word but I like it and I’m using it) as it appeared to be? Yes and no. Yes on price, no on volume and leading stock moves. Technically, today could be considered an accumulation day because volume levels came in higher than the day before, but with the market up 3.5% I want to see HUGE volume indicating that institutions are buying hand over fist. This looked more like mad scrambling short covering to me. In addition, there were very few leading stock breakouts on my radar today. In fact there were very few leading stocks moving with volume period! There is some room to run given the magnitude of today’s move, but I would absolutely not be chasing stocks on the long side. If you didn’t add long positions on the pull backs in recent days it’s probably best to remain patient for another pull back. You will get your chance. This is still a bear market and as you’ll see in the charts below, we’re still well within a major bearish downtrend.
The Nasdaq has a bit more breathing room to run before hitting major resistance, than do the Dow or S&P. Notice that volume actually came in a touch below average. That is very surprising considering today’s price move. The big fellas were not doing any major buying today.
Volume came in a bit better in the financials dominated S&P, but not exactly impressive. Today’s move clears the way for a move to the next level of resistance around 1400 – 1415 which is right around the area of the bear downtrend. It isn’t far away so I wouldn’t be getting aggressive on the long side here.
Lots of major resistance ahead for the Dow as well. If it can clear the Jan/Feb highs, it won’t be long before it runs smack into major resistance of the downward trend around 13,000.
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day April 1st 2008
Nasdaq: UP 3.67% today with volume 1% BELOW average
Nasdaq ETF (QQQQ) 4.28%, volume 23% BELOW average
Dow: UP 3.19%, with volume 5% ABOVE the average
Dow ETF (DIA): UP 3%, with volume 18% ABOVE the average
S&P ETF (SPY): UP 3.52%, with volume 4% BELOW the average
Russell Small Cap ETF (IWM): UP 3.66%, with volume 33% BELOW the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. Leading stocks significantly underperformed the major indices today as beaten down stocks saw much of the gains today.
Summary:
* Advancers led Decliners 160 to 31
* Advancers were up an average of 3.57% today, with volume 6% ABOVE average
* Decliners were down an average of 1.88% with volume 44% ABOVE the average
* The total SI Leading Stocks Index was UP 2.68% today with volume 12% ABOVE average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/
* Current Leading Sectors/Industries (over last 30 trading days):
Internet Infrastructure, Homebuilders, Intl Utilities, REIT, Biotech, Transports
* Current Lagging Sectors/Industries (over last 30 trading days):
Health Care Providers, Coal, Clean Energy, Utilities
* Today’s Market Moving Industries/Sectors (UP):
Financials, Real Estate, Broker Dealers, Homebuilders, Semis
* Today’s Market Moving Industries/Sectors (DOWN):
Gold
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation. It’s been many weeks since I featured a Stock of the Day. The last was BCPC several weeks ago and before that PRXL. The market just hasn’t yielded many high quality breakouts over the past few months. Even with today’s big market move, there were just two leading stock breakouts in my database today – AsiaInfo Holdings (ASIA) & Intuitive Surgical (ISRG). I like to highlight stocks that are relatively off the radar in this section so tonight I take a look at ASIA.
ABOUT:
Asiainfo Holdings, Inc. (AsiaInfo) provides telecommunications software solutions and information technology (IT) security products and services in China. The Company’s operations are organized into two divisions: AsiaInfo Technologies and Lenovo-AsiaInfo. AsiaInfo Technologies encompasses the Company’s traditional telecommunications business and provides software and solutions to China’s telecommunications carriers, while Lenovo-AsiaInfo provides IT security products and services. During the year ended December 31, 2007, approximately 86% of the CompanyGÇÖs total revenue was contributed by AsiaInfo Technologies, while the remaining revenue was contributed by Lenovo-AsiaInfo. On October 15, 2007, the Company acquired telecommunications Business Support Systems business (BSS), of Shenzhen Modern Computer Manufacturer Co., Ltd.
FUNDAMENTALS:
ASIA is a company with a fairly erratic history which resulted in a loss in 2005. Since that time, the company has bounced back with excellent growth in the last 2 years. Earnings jumped from a loss of .02/share in 05 to a gain of .16/share in 2006 and a near tripling of profits in 2007 with .45/share. Growth is expected to moderate a bit in 08 and 09 but remain very strong at 20 – 30%. While ROE isn’t outstanding at about 11%, it has been rising in the past couple years and continues to do so. Net margins are quite good at about 15%. Management ownership looks good at 25% and many institutions are adding initial positions
TECHNICAL:
ASIA has really rocketed off the January lows and carved out the right side of a steep, V like cup with handle base. I don’t particularly like sharp bases like this but given the healthy volume levels throughout the base and a healthy breakout from a 6 week consolidation today, I think this stock is good for a trade and poised to test the December highs above 13. This is an area I’m looking to take profits. Usually, I’d hold leading breakout stocks longer, but we’re still in a bear market and this isn’t the best looking base around.
SELFINVESTORS RATING: With a total score of 49/60 (25/30 for fundamentals, 24/30 for technical), AsiaInfo (ASIA) is a good SelfInvestors leading stock and should be near the top of any watch list.
Full Disclosure/Disclaimer: The stock of the day is by no means a buy recommendation. Please do your own research and make a personal decision based on your own tolerance for risk. I currently do own a position in AsiaInfo Holdings (ASIA)