What a difference a day makes, but such is typical around a Fed announcement. I mentioned in my report last night that yes the day’s action was strong, but considering that price and volume was not exceptional and that trading on the day of the Fed decision is often a false move to be careful. I thought we could very well close down today but of course never imagined the selling intensity would be so swift and decisive. I’ve been using the terms like jeckyll and hyde and schizo to describe the action of this market over the past several months so today’s action is just more of the same! In the past, we have recovered quickly from these kinds of sell offs, making it difficult to profit consistently in short positions. Perhaps now that the Fed has indicated that their hand holding is now probably off the table, the kind of correction that the market has been flirting with for weeks will now ensue. Today, there was no rumor of Fed action to save the day, just waves of institutional selling. It was an ugly day, there’s no way around it. Tomorrow could be just as ugly as we head into the weekend and there are critical support levels to be aware of for tomorrow and over the next few days: Dow 13200 – 13250, S&P 1480 – 1490, Nasdaq 2700. The important thing to remember is that no clear winner has emerged as the bulls and bears battle it out up here at all time highs in the Dow and S&P. While they’re duking it out and gyrating the indices every which way but loose, it pays to be largely on the sidelines until we get a firm sense of direction. I’ll continue to sound like a broken record in the hopes that maybe just maybe a few more people will heed my advice and preserve their capital after what has been a darn good 4 years of profits.
::: 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 November 1st 2007
Nasdaq: DOWN 2.25% today with volume 45% ABOVE average
Nasdaq ETF (QQQQ) DOWN 1.87%, volume 46% ABOVE average
Dow: DOWN 2.6%, with volume 23% ABOVE the average
Dow ETF (DIA): DOWN 2.23%, volume 105% ABOVE the average
S&P ETF (SPY): DOWN 2.34%, volume 102% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 3.86%, volume 117% 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 were hit hard today, but not quite as hard as the Russell. .. still an awful day.
Summary:
* Decliners led Advancers 331 to 42
* Advancers were up an average of 2.76% today, with volume 158% ABOVE average
* Decliners were down an average of 3.56% with volume 37% ABOVE average
* The total SI Leading Stocks Index was DOWN 2.84% today with volume 50% 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):
Gold, Internet Infrastructure, Gold Miners, Software, Agriculture
* Current Lagging Sectors/Industries (over last 30 trading days):
Retail, Consumer Discretionary, Homebuilders, Semis
* Today’s Market Moving Industries/Sectors (UP):
Commodities, Bonds
* Today’s Market Moving Industries/Sectors (DOWN):
Financial, Homebuilders, Banks, Retail, Real Estate
::: 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. Today’s stock is Cynosure (CYNO), a small company emerging in the very lucrative non invasive cosmetic surgery space.
ABOUT:
Cynosure, Inc. (Cynosure) develops and markets aesthetic treatment systems that are used by physicians and other practitioners to perform non-invasive procedures to remove hair, treat vascular lesions, rejuvenate skin through the treatment of shallow vascular lesions and pigmented lesions, temporarily reduce the appearance of cellulite, treat wrinkles, skin texture, skin discoloration and skin tightening, and to perform minimally invasive procedures for LaserBodySculpting and for the removal of unwanted fat.
FUNDAMENTALS:
CYNO is a company that is really just beginning to hit its stride after losing money in 2000 – 2003, hitting profitability in ’04 but then taking a step back in 2005. That’s all changed in the past 2 years for this small but fast growing company (revenues of just over 100 million over the past year). After more than doubling earnings in 2006, the company is on pace to do so again in 2007 then moderate a bit in ’08 with 25% growth. Those are fantastic numbers on the earnings side but what stands out most to me is the trend of accelerating revenue growth over the past 2 years. Net margins (currently around 14%) and ROE (currently around 11%) aren’t exceptional by any means but solid. Add in the growing number of institutions initiating positions and 40% management ownership and what you have is a company with tremendous potential.. to make you money!
TECHNICAL:
CYNO IPO’d back in late 2005 and broke out of its first base nearly a year later. After more than doubling the stock fell into a new base which it broke out of in early October without ever forming a definitive handle. The stock needed to digest the quick run in September and it’s done that by carving out a bullish triangle formation. A break from this formation (around 40 – 41) is a buy opportunity.
SELFINVESTORS RATING: With a total score of 53/60 (26/30 for fundamentals, 27/30 for technical), Cynosure (CYNO) is a top SelfInvestors breakout stock.
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 CYNO.