There’s quite a bit of doom and gloom out there right now and to a certain degree it’s warranted but tonight I wanted to just throw up the long term monthly charts of the major indices which reveal that this bull market is still intact with a bit of room left to the down side before these long term critical support levels come into play. It’s conceivable that we test these trend lines and continue the bull run but given the length of the run (about 5 years) we have to continue to play defensively up here and remain in capital preservation mode until the market can show that the selling intensity has subsided and buyers are stepping in with some aggression. Perhaps the market is washing out a bit here to prepare for yet another holiday rally but let’s not make big bets on that just yet.
Inthe Nasdaq chart below I’ve drawn out the long term upward trend beginning off the 2003 lows and the start of a new bull market. After a 5 year running of the bulls, the market is no doubt tired but it’s important to note the trend line is still intact. We have about another 50 points to go before the Nasdaq tests this support area around 2575. Despite the pain of the past couple weeks, the bull run is still alive and well but on shaky legs.
Given that the S&P is littered with financial stocks, I think ultimately it could break through that upward trend line which defines the bull market run as more CEO’s are forced to reveal the true nature of the hit they have taken. Those August lows are the next critical area of support. If we break through that level, we could be in for a long bear market.
The Dow is testing a steeper upward trend that began last year but has room to run before testing the 4.5 year bull market trend line around 12500. Considering this area also happens to coincide with the August lows, it’s a very strong area of support. If we take out this level I think it’s safe to say the bull market is dead. Note the indications of topping in the Dow in July (high volume reversal) and last month (churning, which is a higher volume move with little to no price appreciation)
::: Model Portfolio Update :::
For the first time in several weeks, the Self Investors Model Portfolio finished the week with a loss (down 3.7%) which was in line with what the S&P did at 3.7% but year to date is now nearly 10x the performance of the S&P with a gain of 23.9%. Closing out my QID position after the Fed cut rally was probably one of the biggest mistakes I’ve made this year. Knowing that the first Fed cut move is very often a false move, I’m not sure why I didn’t trust that and hold the QID position a few more days. Mistakes happen but hopefully not very often! I continue to tread fairly lightly not making big bets either way although of course I wish I can put on a few more short trades. The decline over the week was so sharp, there just weren’t any good shortable bounces. I did close out one short trade in BTH for a 7% gain but that was tempered by sizable losses in China Digital (STV) and Cynosure (CYNO). I did initiate 3 new small long positions in high quality companies.. I just couldn’t resist dabbling after some of these were thrown out with the rest of the market. The portfolio is currently split equally with 50% long and 50% cash.
::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Internet Service Providers: 14.15%
2. Surety & Title Insurance: 8.20%
3. Hospitals: 4.10%
4. Home Furnishing Stores: 3.15%
5. Farm Products: 2.90%
6. Industrial Equipment & Components: 2.70%
7. Oil & Gas Drilling & Exploration: 2.65%
8. Cleaning Product: 2.30%
9. REIT – Healthcare Facilities: 2.15%
10. Dairy Products: 2.00%
– Top 10 Worst Performing Industries For the Week –
1. Toy & Hobby Stores: -14.55%
2. Major Airlines: -12.95%
3. Data Storage Devices: -12.45%
4. Networking & Comm Devices: -11.95%
5. Recreational Goods: -11.15%
6. Security Software & Services: -10.45%
7. Regional Airlines: -10.40%
8. Personal Computers: -10.35%
9. Wholesale Other: -10.25%
10. Internet Info Providers: -9.95%
– Top 5 Best Performing ETFs For the Week –
1. Ishares Silver (SLV) 5.25%
2. Ishares Gold (IAU) 3.10%
3. Central Fund of Canada (CEF) 3.10%
4. SPDR Gold (GLD) 2.95%
5. KBW Banking (KRE) 2.00%
– Worst 5 Performing ETF’s –
1. Morgan Stanley China (CAF) -14.85%
2. India Fund (IFN) -13.45%
3. PowerShares Global Dragon (PGJ) -12.60%
4. Ishares China (FXI) -12.50%
5. Morgan Stanley India (IIF) -11.40%
::: IPO’s Worth Watching for This Week :::
The first week in many with no China IPO’s!! I particularly like Internet Brands and the MCSI this week.
1. Internet Brands (INET): helps customers research and purchase, online or at an actual location, big ticket items, such as cars, real estate, mortgages, and travel. Its 40-plus Web sites include those for automobiles (Autos.com, CarsDirect.com), homes and mortgages (LoanApp.com), and vacation rental properties (BBOnline.com, VacationHomes.com). The company offers financing and mortgages through various banks. More than 3,000 local car dealers have joined its nationwide network and it has alliances with Penske Automotive Group (formerly United Auto Group) Trading set to begin on Thursday.
2. MSCI (MXB) formerly Morgan Stanley Capital International, creates equity, fixed income, and hedge fund indices as well as risk management and portfolio analysis tools used by 24 of the 25 largest asset management firms. Its most well known products are MSCI World and EAFE indices to watch global funds and BarraOne for Web-based risk analysis. The latest entry is MSCI Global Islamic Indices, which incorporate allowances for Sharia or Islamic law. MSCI operates from about 20 offices worldwide serving nearly 3,000 customers in more than 60 nations. Financial services powerhouse Morgan Stanley owns the company. Trading set to begin on Thursday.
3. Stewart & Stevenson (SSC): company is a leading supplier of equipment used in oilfield services. Stewart & Stevenson operates three divisions: Equipment (oil well stimulation, coil tubing, engines, and material handling equipment), Aftermarket Parts and Service (parts and service for customers in oil and gas, marine, power generation, mining, and construction industries), and Rental (rental of generators, material handling equipment, and air compressors). Customers in the oil and gas services industry such as Schlumberger, Weatherford International, and BJ Services account for about 60% of sales. Trading set to begin Friday.
4. Navios Maritime Partners (NMM) international owner and operator of dry bulk carriers (merchant ships used to transport unpackaged bulk commodities) — formed in 2007 by leading seaborne shipping company Navios Maritime Holdings (NMH) — plans to leverage NMH’s more than 50 years of experience to pursue growth opportunities and expand its fleet. NMP’s initial active fleet consists of six Panamax vessels and one Capesize vessel; it also has two vessels under contract for delivery. Trading set to begin on Monday.
5. Och-Ziff Capital (OZM): provides a variety of alternative asset management services for more than 700 fund investors through five locations in the US, Europe, and Asia. Och-Ziff Capital Management Group’s investment strategies include private equity, real estate, and equity restructuring, among others. With nearly $27 billion in assets under management, the company invests more than 50% of its assets in foreign markets. The hedge fund firm, which has some 130 investment professionals including some 20 partners, commenced operations in 1994. Trading set to begin on Wednesday.
6. EnergySolutions (ES): provides nuclear waste management services, primarily to the US Department of Energy, including nuclear facility decommissioning and decontamination, spent fuel handling, and waste disposal. Three nuclear waste services companies — Envirocare of Utah, Scientech D&D, and BNG America — combined to form EnergySolutions. Trading set to begin on Thursday.
::: Upcoming Economic Reports (11/12/07 – 11/16/07) :::
Monday: None
Tuesday: Pending Home Sales, Treasury Budget
Wednesday: Retail Sales, PPI, Business Inventories, Crude Inventories
Thursday: CPI, Initial Claims, Philly Fed
Friday: Industrial Production, Cap. Utilization
::: Upcoming Notable Earnings Reports :::
Monday: Companhia Paranaense de Energia (ELP), 51job (JOBS)
Tuesday: ExlService (EXLS), Fossil (FOSL), 3SBio (SSRX)
Wednesday: Sina (SINA), Meridian Bioscience (VIVO), GigaMedia (GIGM), KHD Humboldt (KHD), Diana Shipping (DSX)
Thursday: Suntech Power (STP), Green Mountain Coffee Roasters (GMCR), Autodesk (ADSK), Global Sources (GSOL), FCStone (FCSX), Mobile Telesystems (MBT)
::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::
1. Dolby Labs (DLB) To the Moon On Earnings
2. Role Reversal: Dow and S&P Capitulate, Tech Wrecked; Stock of Day – ExlService (EXLS)
3. Brazilian Homebuilder Gafisa (GFA) & Top Solar Play First Solar (FSLR) Spike On Earnings
4. Expert Insight Into the Oil/Gas Engineering Industry
5. October Highs Most Likely A Long Term Top
6. Foster Wheeler (FWLT) The Lone Bright Spot
7. TheStreet.com (TSCM), Quintana Maritime (QMAR) & WMS Industries (WMS) Poised to Hit All Time Highs