Some capitulation today for sure ,but not massive by any means. We opened surprisingly strong today as the market defied the downward momentum of the day before. Some think that the Street.com’s Doug Kass article stating that the Fed will ease momentarily had something to do with it but I doubt it. According to StreetInsider.com, Kass stated:
"I have friends who are very close to members of the Fed, and they say that the Fed will ease momentarily.
This morning, several of those friends gave me an indication of heightened concerns regarding the domestic economy — far more than what has been expressed by the President, the Secretary of the Treasury, and the Federal Reserve in various platforms over the last week.
And they say that the Fed will ease momentarily.
Enough said."
OK whatever.. more rumor. Countrywide going bankrupt yesterday, the Fed with surprise cut today. These kinds of rumors can lead to short term spikes either way but it’s just noise for now.
The recession or no recession debate continues to rage on but there are certainly more and more coming out of the wood works calling for a recession. Goldman Sachs economists predicted a recession this year with unemployment hitting 6.5% by 2009, prompting the Fed to slash rates to 2.5% by the 3rd quarter. Bold predictions. .. and in the blue corner is Fed President Poole, trying to put a positive spin on things saying, "2008 looks to be a year of rising growth" and "economomic forecasters expect slow expansion in the first half of the year and a quickening pace in the second half." He went on to say that the Fed can ease without risking inflation. "Stable inflation expectations give the Federal Reserve a lot of room for maneuver." Kind of makes you wonder what planet these guys are living on. I can’t wait to see how Bernanke plans to save the day tommorrow with his speech titled ‘Financial Markets, the Economic Outlook and Monetary Policy’
Enough predictions, spin, manipulation and rumor. Time for some technical talk. I really would have liked to see some panic selling below those key support levels I discussed last night, followed by a flood of buying. As I mentioned to my premium members today, holding short positions became too much of a risk after lunch. The end of day buying near the August lows of the major indices flashed the exit sign on the short side, but this move doesn’t indicate it’s time to get aggressively long for the longer haul. I personally put on a few swing trades on the long side to take advantage of an oversold bounce, but significant risk remains on the both sides of the market. If you’re not a trader I STILL recommend staying out of this market for now. Your body, mind and trading account will thank you.
The time will come to put on long plays a bit more aggressively, but it’s just a bit too early yet.
::: 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 January 9th 2008
Nasdaq: UP 1.39% today with volume 35% ABOVE average
Nasdaq ETF (QQQQ) UP 2.13%, volume 53% BELOW average
Dow: UP 1.16%, with volume 43% ABOVE the average
Dow ETF (DIA): UP .88%, with volume 62% ABOVE the average
S&P ETF (SPY): UP 1.05%, with volume 43% ABOVE the average
Russell Small Cap ETF (IWM): UP 1.01%, with volume 51% ABOVE 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 didn’t do particularly well today and lagged the general market. Today’s rally was all about laggards recovering from extreme oversold conditions.
Summary:
* Advancers led Decliners 176 to 137
* Advancers were up an average of 2.27% today, with volume 26% ABOVE average
* Decliners were down an average of 2.07% with volume 56% above the average
* The total SI Leading Stocks Index was UP .37% today with volume 39% 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):
Agriculture, Gold Miners, Commodities, Gold, Pharma
* Current Lagging Sectors/Industries (over last 30 trading days):
Broadband, Technology, Aerospace/Defense, Industrial, Semis
* Today’s Market Moving Industries/Sectors (UP):
Global Technology, Regional Banks, Biotech, Technology, Real Estate
* Today’s Market Moving Industries/Sectors (DOWN):
Clean Energy, Home Construction, Internet Infrastructure, US Oil, Commodities, Internet
::: 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. There were very few leading stocks breaking out with big volume to new highs today, but one in particular stood out – Paraxel International (PRXL). Despite a somewhat severe market corrrection over the past few months, PRXL just keeps chugging along to new all time highs with little attention.
ABOUT:
PAREXEL International Corporation is a bio/pharmaceutical services company, providing a range of capability in clinical research, medical communications services, consulting, and informatics and technology products and services to the worldwide pharmaceutical, biotechnology, and medical device industries. Its product and service offerings include clinical trials management, data management, biostatistical analysis, medical communications services, clinical pharmacology, patient recruitment, regulatory and product development consulting, health policy and reimbursement, industry training and publishing, medical imaging services, interactive voice response systems, clinical trial management systems, Web-based portals, systems integration, patient diary applications and other drug development services. In September 2007, it completed the acquisition of Taiwan-based APEX International Clinical Research Co., Ltd., which was subsequently renamed as Parexel Apex International.
FUNDAMENTALS:
I’m surprised that Paraxel (PRXL) hasn’t received more attention over the years. This is a company that has posted substantial earnings growth in each of the past several years dating back to 2002, with the exception of 2005. Excellent earnings growth is expected to continue for at least the next 2 years according to analysts. Estimates call for a 28% earnings jump this year and 25% next year. While net margins aren’t exceptional and not characteristic of a homerun stock at just 5%, they are above the industry average. Return on equity is much better at around 15%. Overall, this is a very good company fundamentally.
TECHNICAL:
PRXL has been in a long, steady uptrend for over 2 years now and isn’t showing signs of slowing anytime soon. Given the fact that it has been so strong in a such a weak market is a testament to its strength. Having said that though, it’s a bit extended so is risky at these levels. I would look to add shares on pull backs to near the 50 day moving average.
SELFINVESTORS RATING: With a total score of 49/60 (24/30 for fundamentals, 25/30 for technical), Parexel (PRXL) is a good SelfInvestors leading stocks and should be put on the radar.
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 not own a position in Parexel (PRXL)