The Sabrient Blog

Thrill-Ride Thursday – Where Will Economic Indicators Lead Us?

By Phil at Phil’s Stock World

Isn’t this fun?

Up 200, down 200, up 200, down 200 - wash out your savings, rinse and repeat!  What a total sham of a market we have these days with machines running us up and down on virtually no news at all.  Yesterday they would have you believe that Ben Bernanke caused a sell-off.  How ridiculous is that?  He didn’t say one thing that he didn’t already say in the Fed Minutes that were released on the 14th, which were the notes from the meeting of June 23rd so for analysts to get on TV and say “the markets were concerned by the Chairman’s comments” is beyond stupid – it’s criminal negligence.

That’s Can Not Be Correct and other media outlets are supposed to have something that is called a Public Trust, which means that broadcast licenses are a national resource that are meant to be used responsibly.  I know, that almost sounds like a joke but it’s not – we used to care about these things…  Now the public is treated like cattle and is simply stampeded to the slaughterhouse at the whim of the media and the Big Money that pulls their strings and our equally puppet Government spend their days fighting over who gets to wear the captian’s hat on the Titanic.  Maybe it is a joke - too bad it’s on us!

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Tech Wreck Tuesday – IBM and TXN “Disappoint”

By Phil Davis at Phil’s Stock World

Wheeeee – this is fun!

Well, it’s fun when you have disaster hedges anyway.  I already sent out an Alert to Members this morning reminding them that there’s no point in having disaster hedges if you don’t use that money to buy on the dips, though.  Yesterday we added downside, leveraged plays on SDS (2) and DXD and our focus short was on NFLX (last week it was MA, and that went very well) along with our usual DIA Mattress play.  That shifted us a bit negative as we failed to hold our watch levels and now we are sadly looking all the way down to those low closes of:  Dow 9,686, S&P 1,022, Nasdaq 2,081, NYSE 6,434, Russell 590, SOX 332 and Transports 1,905 as a possible re-test if things get really ugly.

On July 3rd I laid out “5 Plays that Make 500% if the Market Falls” and, fortunately, we didn’t need them as we took off on Monday but they are still good plays and a little cheaper now than they were when we last tested our bottoms.  If you are not well-protected – I strongly suggest you read this post and at least be ready to initiate a hedge if we can’t turn this morning around.  As with most day’s lately – it’s all about copper and the $3 line…

That being said, I do think we will turn this morning around eventually - because IBM is down $7 and the Dow moves about 8 points per $1 of component value so that’s hitting the Dow for 56 points all by itself.  IBM’s earnings were great but revs missed, in large part due to currency issues.  BRIC revenues were up 22% for the company, despite the crap exchange rate.

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Tipping Point Deja Vu

by David Brown, Chief Market Strategist, Sabrient Systems

Seems like we were here just last week, waiting for the market break out of its “Channel of Gloom” or tip further into the Channel’s murky depths.  In fact, we came close to tipping to the positive side last week but were held down by a poor consumer sentiment report on Friday and negative earnings from Google (GOOG), plus a double negative whammy from Bank of America (BAC).  Not only did BAC announce negative revenues, it let loose with a scary warning about the negative impact of write-offs from the new financial regulations. So on Friday, the S&P 500 tipped further into the three-month Channel of Gloom.

Today  the market drifted near the unchanged mark most of the day, but S&P 500 managed to close up +0.6%, well below the top of the Channel and still submerged below its 50-day and 200-day moving averages.  In the after-market, following IBM’s disappointing revenues report, the market gave it all back, and then some.

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One hesitates to put too much emphasis on any given week when discussing market trends, but this week could be the tipping point for the current market. Despite the S&P 500’s 50-point gain last week on virtually no news at all, the fact remains that it is still more than 12% below the April 23rd high of 1217 and still has not broken out of the downward channel that began on April 26.

The bottom of the channel was reached about two weeks ago at 1010, and the top is now about 1080, as you can see from the chart below. Coincidentally, the top is close to where the 50-day and 200-day moving averages currently reside.

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ETF Periscope:  Mirror, Mirror on the Wall Street

“‘But I don’t want to go among mad people,’ said Alice. ‘Oh, you can’t help that,’ said the cat. ‘We’re all mad here.’” ~Lewis Carroll

One version of a well known children’s fairytale features a magic mirror that, upon being asked the question “Who’s the fairest of them all?” replies with the harsh truth of reality.  Such a mirror would be eminently useful at this juncture in time, when the markets are, at best erratic and yes, even a bit more schizophrenic than usual.

So in terms of the markets right now, who, indeed, is the fairest of them all? Would it be the snorting Bovines, who have prodded the major indexes past key points of resistance during the current holiday-shortened week, or the lumbering Grizzlies who pounded the indexes into submission for the bulk of the last several weeks?

Who, indeed, mirror, mirror? Bear or Bull? Or maybe a beast of a more sideways nature?

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“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”  ~ Sun Tzu

It is not uncommon to hear that nothing quite compares with the mad frenzy that is World Cup soccer. Nothing, perhaps, except for Wall Street, where degrees of both frenzy and madness can be as common as yellow cards dished out in the course of a fever-pitch match.

A slew of mixed financial news poured out this week, with a bias towards the negative side. In response, the Dow Jones Industrial Average retreated to the downside, ending at 10,143 and a loss of slightly over 300 points. Though the Dow began the week by ramming a header towards its 50-day moving average, it proved to be no more than a head-fake. The DJIA ended crashing below its 200-day MA, a point that can offer stiff resistance once breached.

In advance of next week’s G-20 summit meeting, China announced that it would allow greater flexibility in its currency exchange rates. The markets’ Monday morning cheers lasted briefly, until it seemed to realize that the reform offered was little more than a bone tossed in response to the Obama administration’s clarion calls to address the huge trade imbalance between the two countries.

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How to Buy Quality Value Stocks for a 10%-20% Discount with Phillip Davis’ Option Strategies

By Phil Davis at Phil’s Stock World

If you want to concentrate on investments that give you better prices than those paid by the average retail investor, pick value stocks. This will allow you to stay ahead of the game using very basic option strategies.

The best method to work your way into new bullish positions with value stocks is with the famous Phil’s Buy/Write Strategy. This strategy is the most sensible way to initiate new stock positions using one of the most effective, time-tested tools for dealing with market uncertainty.  This strategy allows you to purchase stocks for 10%-20% below their current price.  The strategy is called a “Buy/Write” because we buy the stock and write/sell options against it.

Assuming that you want to own 200 shares of a stock, Phil’s Buy/Write Strategy can reliably give you a 10-20% discount off the current market price.  It’s simple, easy to follow, and ideal for trading in a volatile market.

Sound investing principles include purchasing stocks that have strong underlying fundamentals, stocks we don’t mind owning for the long-term.

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This week should be another interesting one, but it’s hard to say whether it can match the market’s behavior last week when it donned rose-colored glasses to view four days of mixed economic data.

Last week there were negative reports from the Treasury budget, trade balance, initial jobless claims, industrial production and consumer sentiment.  On the other hand, we had positive reports from retail sales, business inventories, building permits and housing starts.  Perhaps the most important report was the CPI, and it came in right on the nose, telling us we still do not have to fear inflation . . . at least not yet.

The rosy outlook was helped by last week’s corporate reports.  Granted, things got off to a slow start with a glum outlook from Alcoa (AA), but by far and away, most reports were much better than expected, including JP Morgan Chase (JPM), United Parcel Service (UPS), Yum! Brands (YUM), Bank of America (BAC), General Electric (GE), and Advanced Micro Devices (AMD) with its unexpectedly excellent report.   So far so good for the corporate side. Read more…

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It has been a week of sparse market-moving news, but what news there was continued to be generally supportive of the market’s slow growth recovery. Remarkably, volatility continues to be very low. Unlike the 6 to 10% gyrations (in both directions) of late 2008 and early 2009, we’ve seen very few days this year when the market has moved more than 1% in either direction.

That could change — maybe soon, as this week is packed full of potentially market moving reports.

On the government side, we have trade balance data tomorrow, along with export and import price data. Wednesday brings the Consumer Price Index (CPI), retail sales, and business inventories. Thursday we have the weekly initial jobless claims, along with the fairly important industrial production report and capacity utilization. On Friday, building permits and housing starts top off the week. Read more…

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Perhaps it was the new senator from Massachusetts who let the bears out, but I suppose it was a bit more than that. When the week began on Tuesday, after the Martin Luther King holiday, the bulls were grazing happily on GARP stocks, as contented as California cows.  But then somebody opened that gate, and the bears roared through and the bulls ran for cover.

It wasn’t exactly a massacre, but it was far from pretty. Consider that the best style/cap, Small-cap Value, was down 4.3% and the worst, Large-cap Value, was down 5.2%.  Obviously, all style/caps were ravaged, and the week’s carnage wiped out everything we had accomplished since Santa Claus came in December. Read more…

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