The much anticipated oversold bounce came in with a fury as oversold bounces often do and it didn’t take much to ignite the bulls as more of the mortgage mess became priced in. On Tuesday, news of a 1.4B Wells Fargo write down and Freddie cutting its dividend in half and raising 6B in capital failed to send the markets into a tailspin on Wednesday morning, which set the market up for a bull stampede. The bulls may have been reaching a bit, but they found a glimmer of hope in comments made from Fed Vice Chairman Kohn who reiterated concerns about economic uncertainty saying ""These uncertainties require flexible and pragmatic policy-making .. ". The sentiment was echoed by Bernanke the following day, further cementing hopes of another rate cut at the Fed December 11th meeting.
So is this just a short lived suckers rally or something more? Is this the beginning of another major leg up as the market climbs a monumental wall of worry? By Investor Business Daily standards, the action on Wednesday was enough to confirm a new rally but this should not be a green light to get overly aggressive on the long side. What is critical in my mind is how we digest the gains of last week. A light sell volume pull back would go a long way in lending validity to this market surge and provide opportunity to slowly add long exposure. As I mentioned in my after market report on Wednesday, the magnitude of the rise last week into key resistance levels has allowed for a decent area to put on a few short positions as a hedge, but I think the next two weeks will be critical in determining where this market is headed over the longer haul. The government bail out plan is expected to be revealed soon and the Fed has indicated they are remaining vigilant and not afraid to take further action.
Don’t fight the Fed (or this administration) certainly continues to be at play in this market. It’s just more of the same. Subprime and economic uncertainty tempered by government intervention and what will probably be a flood of overseas investment in US assets should keep the markets gyrating for many more months to come. It still pays to be cautious and sitting on a decent sized pile of cash at this point.
::: Model Portfolio :::
Despite a tumultuous Oct/Nov in the market, the SelfInvestors Model Portfolio is getting back close to highs of the year with a 3.1% rise for the week, bringing the year to date gain to 27%. Oversold conditions and a resulting bounce got me into a few high quality long positions in leading companies which resulted in gains of 7%, 8% and 9% but the magnitude of the bounce ran the indices right smack into key resistance levels, so I hedged the portfolio with a few short positions towards the end of the week. With the volatility and uncertain market, I will continue to keep the portfolio sitting on a sizable cash position of around 50% (it’s currently at 46%) as well as hedge with short positions. It’s a strategy that has worked extremely well in 2007 and I don’t anticipate deviating from it too much over the next several months. The current allocation of the portfolio is 41% long and 13% short.
Would you like to receive buy and sell alerts within minutes of each transaction of the Model 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. Mortgage Investment: 17.50%
2. Hospitals: 12.25%
3. Pollution & Treatment Controls: 11.60%
4. Cement: 8.90%
5. Technical & System Software: 8.50%
6. Agricultural Chemicals: 8.45%
7. Business Equipment: 8.35%
8. Building Materials Wholesale: 8.20%
9. Heavy Construction: 8.00%
10. Farm & Construction Machinery: 7.45%
– Top 10 Worst Performing Industries For the Week –
1. Jewelry Stores: -12.75%
2. Silver: -5.71%
3. Drug Stores: -2.90%
4. Housewares & Accessories: -2.20%
5. Movie Production – Theaters: -2.05%
6. Oil & Gas Refining & Marketing: -1.90%
7. Gold: -1.80%
8. Networking & Comm Devices: -1.30%
9. Oil & Gas Equipment & Services: -1.10%
10. Sporting Goods Stores: -1.05%
– Top 5 Best Performing ETFs For the Week –
1. PowerShares Golden Dragon (PGJ) 12.50%
3. Templeton Dragon Fund (TDF) 11.30%
5. MSCI Inida (INP) 9.85%
– Worst 5 Performing ETF’s –
2. US Natural Gas (UNG) -8.50%
3. HLDRS Oil Services (OIH) -6.00%
4. Central Fund of
5. Ishares Commodities (GSG) -5.65%
::: IPO’s Worth Watching for This Week :::
1. WSP Holdings (WH): The Chinese manufacturer, which conducts business through various subsidiaries, produces seamless casing, tubing, and drill pipes. Referred to collectively as OCTG (Oil Country Tubular Goods), its products are used by the oil industry for oil and natural gas exploration, drilling, and extraction purposes. WSP sells domestically to leading Chinese oil companies, as well as internationally, covering oilfields in
2. Titan Machinery (TITN): sells and rents new and used agricultural and construction equipment through its 33 retail locations located in North Dakota, South Dakota, Minnesota, and Iowa. Farming equipment includes excavators, seeders, tillers, and tractors; it offers such construction machinery as earthmoving equipment and cranes. Titan primarily deals in products manufactured by CNH which are sold under the Case and New Holland brands; other brands on offer include K-Tec and Grove. The company also sells parts and provides maintenance and repair services. Trading set to begin on Wednesday.
3. Triple S Management (GTS): the reigning heavyweight when it comes to
4. VisionChina Media (VISN): through China Digital Mobile Television, operates an advertising network that consists of some 33,000 digital television displays located on buses in more than a dozen major Chinese cities. The displays receive mobile digital broadcasts from local TV stations of real-time content — such as news, stock quotes, weather and traffic updates, sports highlights, and public interest messages — sprinkled with paid advertisements. This location-based content and advertising reaches about 26 million consumers each day. Trading set to begin Thursday.
::: Upcoming Economic Reports (
Monday: ISM Index, Auto/Truck Sales
Wednesday: Productivity (rev), Factory Orders, ISM Services, Crude Inventories
Thursday: Initial Claims
Friday: Nonfarm Payrolls, Unemployment Rate, Consumer Credit
::: Upcoming Notable Earnings Reports :::
Tuesday: Versant (VSNT)
Thursday: Gildan Activewear (GIL), Verifone Holdings (PAY)
Friday: OYO Geospace (OYOG)
::: In Case You Missed It – SelfInvestors Blog Entries of the Past Week :::