Two things are now very clear in this market. The rally is for real and it’s due for a rest. The volume accompanying the move up and the lack of a sharp reversal after the Dow touched all time highs are good indications that this market has some legs.. but those legs need a rest. With the major indices hovering around "psychological" resistance areas (Dow 12000, S&P 1350 and Nasdaq 2300) there’s a good chance that will happen sooner rather than later.
::: Model Portfolio Update :::
It was not a good week for the Model Portfolio. The market went one way and the portfolio went the other after taking sizable hits with my 2 semiconductor plays (which I’m still holding) and smaller losses on a couple short positions. It was a busy week in terms of the number of transactions. In the beginning of the week, 5 new long positions were initiated following a breakout of the Dow to all time highs. On the other hand, 2 shorts were initiated in commodity plays.
A few positions were closed out during the week – 3 long positions in Cognizant Tech Solutions (CTSH), PrivateBancorp (PVTB) and NutriSystems (NTRI); one short in Kinetic Concepts (KCI). I locked in a small 4% profit in CTSH following several days of weakening technicals. With the market in near term overbought territory I’m locking in profits in stocks not showing strength well above average. I also locked in a small profit in PVTB following a high volume drop below the 50 day moving average. NTRI was sold quickly for a small loss after the stock failed to stage a big follow through after breaking out. Buy volume was meager and sell volume picked up on Oct. 3rd when the position was sold. The KCI short was covered for a small loss on Oct. 5th for a small loss after it appeared the stock was gaining momentum and would clear resistance of the 50 day moving average. The stock vaulted 5% the very next day.
The game plan at this point is to avoid making large bets on the long side and wait for the pull back, which would offer the opportunity to get much more aggressive on the long side and begin leveraging with margin. Despite a 1.1% loss in the portfolio last week, it still sits with a 16.5% YTD return.. more than double the S&P500.
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::: Best/Worst Performers :::
– Top 10 Performing Industries For the Week –
1. Restaurants 10.78%
2. Specialty Eateries 9.75%
3. Resorts & Casinos 6.85%
4. Appliances 6.45%
5. Sporting Activities 6.20%
6. Gaming Activities 6.05%
7. Major Airlines 5.80%
8. Trucking 5.10%
9. Networking & Comm Devices 4.85%
10. Aerospace/Defense 4.85%
– Top 10 Worst Performing Industries For the Week –
1. Copper -15.80%
2. Silver -5.70%
3. Medical Practitioners -5.20%
4. Semiconductors – Memory Chips -4.30%
5. Drug Stores -4.20%
6. Oil & Gas Drilling & Exploration -4.20%
7. Oil & Gas Equipment & Services -3.55%
8. Gold -3.00%
9. Independent Oil & Gas -2.45%
10. Semiconductor – Integrated Circuit -2.10%
– Top 5 Best Performing ETFs For the Week –
1.Powershares Dynamic Biotech (PBE) 4.10%
2. Ishares Broker Dealer (IAI) 3.90%
3. Ishares Singapore (EWS) 3.45%
4. Ishares Brazil (EWZ) 3.30%
5. Latin Discovery Fd (LDF) 3.25%
– Worst 5 Performing ETF’s –
1. Ishares Gold (IAU) -4.50%
2. StreetTracks Gold (GLD) -4.20%
3. Central Fund of Canada (CEF) -3.80%
4. HLDRS Oil Services (OIH) -3.75%
5. Turkish Invest Fd (TKF) -3.75%
** IPO’s Worth Watching for This Week **
The number of IPO’s coming to market will increase dramatically over the next few weeks, so keep an eye on this space!
1. Acme Packet (APKT): Provider of session border controllers that allow service providers to deliver secure, high-quality interactive communication, such as voice, video, VOIP, and other real time multimedia sessions across IP network borders. The company’s products enhance security and encryption for telecom providers, corporations and law enforcement agencies. Acme Packet is a raidly growing company that is now profitable. Trading set to start on Thursday.
2. eHealth (EHTH): California based online provider of health insurance for individuals, families, and small businesses in 50 states. It’s another rapidly growing company that has turned the corner to profitability. Trading set to start on Friday.
3. SAIC (SAI): Defense contractor suplying scientifc, engineering, systems integration, and technical services to all branches of the US government. SAIC is a large and growing company with 43,000 employees. Trading set to start on Friday.
** Upcoming Economic Reports (10/9/06- 10/13/06) **
Monday: None
Tuesday: Wholesale Trade, Retail Sales, Economic Optimism
Wednesday: FOMC Minutes, Job Vacancies, Petroleum Status, Mortgage Apps
Thursday: Money Supply, Treasury Budget, Trade Balance, Jobless Claims, Biege Book
Friday: Import Price Index, Business Inventories, Consumer Sentiment (prelim), Retail Sales
** Latest Blog Entries – In Case You Missed Them!**
– SelfInvestors Blog –
Dow to Record High, Now What? (Oct. 3rd)
http://investing.typepad.com/tradingstocks/2006/10/dow_to_record_h.html