Market Breaks Out, S&P Clears All Time High; Hot IPO – Airvana (AIRV) | SelfInvestors

I have to admit, I didn’t see it coming. That rally we had on Thursday.. the largest in a couple of years that led to breakouts of trading ranges in both the Dow and S&P500. There must have been some kind of terrific news out right? A hint of a rate cut from the Fed, news that inflation doesn’t exist and never will, news that China is buying the US at a 50% premium. No, it was just news that the typically volatile same store retail sales weren’t as bad as everyone had feared. Walmart posted surprisingly upbeat results, which by the way, comes after struggling with same store sales for many weeks. Was it just an aberration? Never mind that the June same store sales growth was due in large part to grocery sales. Grocery sales? Oh and the daily dose of merger activity also provided a boost with news of a Rio Tinto takeover of Alcoa. It all scared the shorts off shorts which further fueled the rally. Hey, nobody ever said the market made any sense. We’ve all heard the phrase "The market can stay irrational longer than you can stay solvent." This doesn’t mean we should ignore the growing concerns in housing, food and energy inflation, etc. but until this market begins paying more attention to the negative news (ie. Friday’s poor retail results) rather than rallying on any nugget (however small) of positive news, it pays to ride the trend.

From a technical perspective, Thursday’s rally was significant. Both the Dow and S&P broke out of trading ranges catapulting both indices to new all time highs (these former resistance levels will now act as key support). One knock against Thursday’s rally was the volume, which was lackluster for a move of this magnitude. We’re certainly overbought in the near term, but any light volume pull backs from here would provide opportunities to initiate additional opportunities on the long side.

dow breakout stock chart

Looking ahead to next week, earnings (particularly in tech) kick off in full force with reports out of Intel, Yahoo, Google, Ebay which could set the stage for this market for the rest of the year. Also on tap is inflation data and Fed minutes. My feeling is if the market can hold its breakout on Thursday following all of the key reports, we could be in for another nice leg up.

::: Model Portfolio Update :::

The model portfolio was positioned to take advantage of a market move either way with a bias to the long side, but with Thursday’s move that little lean to the bearish side was gone with the elimination of some hedging with DXD and QID positions which were closed for significant losses. I still don’t regret the decision to hedge my bets with these Ultra Short ETF’s, despite te fact it hurt my performance considerably. I have to trade what I see and what has worked well for me over the years. From a technical perspective, my analysis was showing some trouble ahead. It hasn’t panned out that way but I’m still in good position to beat the market by keeping pace during what has been a highly irrational (from a technical perspective) and volatile market. During the week, despite losses in the hedge positions, the portfolio surged another 2% and closed the week with an 8.3% YTD gain. With the market breaking out of a trading range the allocation of the portfolio has shifted more to the long side with 3 new long positions initiated. A sizable portion remains in cash (30%) and just a small portion remains in short positions (5%).

::: Best/Worst Performers :::

– Top 10 Performing Industries For the Week –

1. Aluminum: 10.70%
2. Technical Services: 10.30%
3. Aerospace/Defense: 6.75%
4. Copper: 6.35%
5. Trucks & Other Vehicles: 5.75%
6. Diversified Investments: 5.20%
7. Semiconductor – Memory: 5.00%
8. Farm & Construction Machinery: 4.75%
9. Nonmetallic Mineral Mining: 4.50%
10. Semiconductor Specialized: 4.20%

– Top 10 Worst Performing Industries For the Week –

1. Long Distance Carriers: -4.85%
2. Auto Parts Stores: -4.40%
3. Sporting Activities: -3.30%
4. Electronic Stores: -3.15%
5. Office Supplies: -2.90%
6. Major Airlines: -2.75%
7. Publishing – Books: -2.70%
8. Surety & Title Insurance: -2.45%
9. Music & Video Stores: -2.45%
10. Auto Dealerships: -2.40%

– Top 5 Best Performing ETFs For the Week –

1. Morgan Stanley China (CAF) 8.15%
2. Wilshire Clean Energy (PBW) 5.80%
3. Ishares South Korea (EWY) 5.20%
4. Ishares Brazil (EWZ) 5.10%
5. Templeton Russia (TRF) 4.90%

– Worst 5 Performing ETF’s –

1. Chile Fund (CH) -6.00%
2. Ishares Mexico (EWW) -1.05%
3. SPDR Retail (XRT) -.90%
4. HLDRS Oil Services (OIH) -.65%
5. SPDR REITs (RWR) -.55

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

You won’t find Orbitz on the list this week. You’d think this would be a hot IPO in a well recognized internet travel company growing by leaps and bounds, but this is a company that lost 146 million last year. Giga Om calls it the worst IPO of 2007: http://gigaom.com/2007/05/11/orbitz-the-worst-ipo-of-2007/

1. Airvana (AIRV): The company makes mobile broadband infrastructure products for wireless carriers. Its products enable wireless networks to deliver broadband multimedia services — such as Internet access, e-mail, music downloads, and video streaming — to cell phones, laptops, and other mobile devices. Airvana sells its software and hardware to service providers such as Verizon Wireless in the US, TELUS in Canada, Telstra in Australia, Israel’s Pelephone, and Eurotel in the Czech Republic; however, most of its revenue (some 95% in 2006) is derived from Nortel Networks. Founded in 2000, Airvana operates offices in China, India, Japan, South Korea, the UK, and the US. Trading set to begin on Friday.

2. Limco-Piedmont (LIMC): wants to keep planes out of limbo while waiting for repairs. The company (formerly Limco-Airepair) performs aircraft component maintenance, repairs, and overhaul services for commercial and military planes as well as air cargo carriers. Most of its work is on heat transfer parts. Limco-Piedmont also makes heat transfer equipment used in airplanes and offers inventory management and parts procurement for airlines. Parts services account for about a quarter of the company’s business. Major customers include the US government, KLM Royal Dutch Airlines, Lufthansa, and Bell Helicopter. The company is a subsidiary of Israeli aircraft parts maker TAT Technologies (note: TAT is a growing company with a nice looking base – check it out ticker TATTF. Trading set to begin on Friday.

3. MF Global (MF): MF Global isn’t just working Monday through Friday. The brokerage firm, one of the largest in the US, handles futures, options, foreign exchange products, and equity derivatives. It also acts as an intermediary in metals and energy markets. With more than $61 billion of funds under management, MF Global operates on about 15 exchanges including LIFFE and the Chicago Mercantile Exchange. About half its revenue comes from institutional investors, half from individuals. The company has a dozen offices in Asia, Africa, Europe, and North America. Hedge fund manager Man Group, which is spinning off its Man Financial as MF Global, dates to 1783 when James Man formed a sugar trading business. Trading set to begin on Thursday.

4. Netezza (NZ): Netezza provides data warehouse appliances used to manage large databases. Targeted toward companies such as financial services companies and telecom service providers, Netezza’s appliance integrates database, server, and storage functions, allowing customers to quickly analyze huge amounts of data. Customers include Acxiom, Amazon.com, CNET Networks, ClarityBlue, Neiman Marcus, and Shoppers Drug Mart. The company established a Federal Systems division in 2005, aiming at federal government customers. "Netezza" is the Urdu word for "results." The company was founded in 2000 and filed to go public in 2007. Trading set to begin on Thursday.

::: Upcoming Economic Reports (7/16/07 – 7/20/07) :::

Monday:        NY Empire State Index
Tuesday:       PPI, Net Foreign Purchases, Capacity Utilization, Industrial Production
Wednesday: CPI, Housing Starts, Building Permits, Crude Inventories
Thursday:      Initial Claims, Leading Indicators, FOMC Minutes
Friday:           None

::: Notable Upcoming Earnings Reports I’ll Be Watching This Week :::

Earnings season kicks off in full force on Tuesday!

Tuesday: Intel (INTC), Yahoo (YHOO), Johnson & Johnson (JNJ), Healthcare Services (HCSG)

Wednesday: Noble Corp (NE), NVE Corp (NVEC), Acergy (ACGY), First Cash Financial (FCFS)
Altria Group (MO), Cavium Networks (CAVM), Ebay (EBAY)

Thursday: Google (GOOG), Sunpower (SPWR), Danaher (DHR), CyberSource (CYBS)
Gilead Sciences (GILD)

Friday: Caterpillar (CAT), Satyam Computer (SAY), Schlumberger (SLB), Citigroup (C)

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

1. Trade of the Day – Daystar Technologies (DSTI) Attempting Breakout from Triangle
https://selfinvestors.com/tradingstocks/stock-trade-of-the-day/trade-of-the-day-daystar-technologies-dsti-attempting-breakout-from-triangle/

2. Gary Scott Highlights the Risks & Rewards of Leveraging
https://selfinvestors.com/tradingstocks/uncategorized/gary-scott-highlights-the-risks-rewards-of-leveraging/

3. Beware of Credit Card Fraud
https://selfinvestors.com/tradingstocks/credit-cards/beware-of-credit-card-fraud/

4. Trade of the Day – Banco Itau (ITU), Flat Base Break Out
https://selfinvestors.com/tradingstocks/stock-trade-of-the-day/trade-of-the-day-banco-itau-itu-flat-base-break-out/

5. Trade of the Day – Energizer Holdings (ENR) Flat Base Breakout
https://selfinvestors.com/tradingstocks/stock-trade-of-the-day/trade-of-the-day-energizer-holdings-enr-flat-base-breakout/