The Surf Report

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Marketsurfer's weekly recap from Yahoo:


Whipsaw is the only word that is appropriate for the action this week. Incredible swings and wild volatility seized stocks in an epic, winner take all cage matches between the free market and government attempts at control.


EDIT EDIT EDIT EDIT EDIT EDIT $$$****


Monday witnessed the largest point rally in history as the market reacted with exuberance regarding a financial rescue plan hatched at the G7 meeting over the weekend. Tuesday was rather lack luster compared to the recent fireworks, as profit takers from the monster rally sold some shares pulling the indexes down slightly across the board. The elation was short lived when the economic reality of diving retail sales slammed stocks on Wednesday, erasing much of the Monday gains. Thursday saw a volatile session with the intraday VIX index striking all time intraday highs of 81. A late day rally lifted stocks ending the day solidly positive.

Today is option expiration day with over 75 million options expiring which can lead to a volatile session. Normal market shaking bad news in the form of sharply lower housing starts knocked the market down this morning, but this market is anything but normal right now, rallying quickly into positive territory.

Chaotic market conditions such as these require a tested and proven method to pick safe, yet likely to appreciate stocks for your long term portfolio. Our long term PowerRatings fill this niche by being built upon 12 years of extensive, statistically valid studies across most market conditions. Our studies indicate that stocks earning a 10 long term PowerRating have an 81% chance of being higher one year later. Those with a 9 rating possess a 79.1% chance of trading higher one year later. Conversely, stocks that are awarded low ratings of 1, 2, or 3 have proven to simply be too volatile and risky for prudent, conservative long term investors. You can clearly see the statistical advantage in building a long term portfolio consisting of 9 and 10 rated stocks, while avoiding the lower ratings. Let's take a closer look at several of the most interesting long term PowerRated stocks profiled this week:

Hospitality Properties Trust (NYSE:HPT - News) - This REIT invests in geographically diverse hotel and travel center properties in the United States. The company was just upgraded from a 3 to a 4 long term PowerRating. They suffered losses in the 2nd quarter due to issues with their "truck stop" properties Travel Centers of America experiencing issues due to surging diesel fuel prices. In response, HPT deferred a portion of the rent for up to 30 months. This resulted in the losses for the quarter. Technically, the stock has been in a downtrend until yesterday where it appears to have found a bottom and bounced a little. Dropping fuel prices may work to lift this stock.

Johnson & Johnson (NYSE:JNJ - News) - The number one rated stock from the Dow 30 Index with an 8 long term PowerRating. The New Brunswick, NJ based drug manufacturer posted an 8.7% increase in sales and a 12.4% increase in Earnings Per Share for the 2nd Quarter. Technically, market conditions appear to have knocked this stock down to 52 where it has found a base, bouncing back up hard.

Amgen Inc (NasdaqGS:AMGN - News) - This venerable biotechnology company is the second highest ranked stock in the Nasdaq. It has earned a 7 long term PowerRating. Earnings have increased by 2% , Revenue by 1% and Full Year Revenue Guidance was raised from $14.2 billion to $14.6-14.9 billion. The CEO stated that the first 6 months of 2008 showed stability and they are very pleased with the outcome of various tests on new drug products. Technically, price is bouncing off the 45 level that appears to be support.

Baxter International (NYSE:BAX - News) - A medical equipment and supply company that has earned an 8 long term PowerRating. They recently posted a 31% second quarter Earnings Per Share increase and have raised their full year guidance. Technically, the company appears to have hit a bottom around 52 and has bounced up from this level.

Consolidated Edison (NYSE:ED - News) - This is the number one requested stock by the long term PowerRating community. The company is a New York based power utility company that has earned a 7 PowerRating. Second quarter earnings of $2.02/share are up substantially from same time last year earnings of .58 cents/share. The other metrics are up nicely as well across the board. This increase is due to successful completion of investment sales. Technically, the stock has been in a downtrend but now appears to have found support in the 37/38 range.

Stocks In The News:

Here is a sampling of stocks that caught my eye this week from the wires:

Ford (NYSE:F - News) - Experienced its biggest intraday gain since 1980 after the automaker announced it was considering selling its share in Mazda

Morgan Stanley (NYSE:MS - News) - Soared after closing a $9 billion dollar deal with Japan's Mitsubishi Financial Group

Citigroup (NYSE:C - News) - Jumped after Treasury Secretary Paulson advised that the government will buy stakes in individual banks. This statement resulted in the entire sector rallying.

Boeing NYSE:BA - Fell on failing union negotiations resulting in a 6th straight week of idle factories

Coca Cola (NYSE:KO - News) - Bucked the downtrend climbing after beating analysts' estimates

Callaway Golf (NYSE:ELY - News) - Was driven down after being downgraded by Wachovia due to the global economic slowdown

This Weeks Top Performers:

Alliance Bernstein (NYSE:ACG - News)

Johnson & Johnson

Cephalon (NasdaqGS:CEPH - News)

This Weeks Worst Performers:

Smurfit Stone (NasdaqGS:SSCC - News)

Chungwa Telecom HT

Dominos Pizza (NYSE:DPZ - News)

What To Look For Next Week:

Monday - Leading Indicators

Wednesday - Crude Inventories

Thursday - Initial Claims

Friday - Existing Home Sales
 
Quote from BillBebinger:

I don't know if you normally present yourself as having an inability to grasp simple logic, but feel free to continue to perpetuate your delusions publically. I'm confident many find your rants hilarious.
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:). Please enlighten me.

Surf
 
Our studies indicate that stocks earning a 10 long term PowerRating have an 81% chance of being higher one year later. Those with a 9 rating possess a 79.1% chance of trading higher one year later. Conversely, stocks that are awarded low ratings of 1, 2, or 3 have proven to simply be too volatile and risky for prudent, conservative long term investors.
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Surf - why not go SHORT the low rated stocks and LONG the high rated ones a la pair-trading approach ?
 
Quote from syswizard:

Surf - why not go SHORT the low rated stocks and LONG the high rated ones a la pair-trading approach ?
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the PR's are partially rooted in volatility for long term ( 1 plus year ), its not past performance based. low rated PR's have greater volatility potential which can lead to sharp moves. not really suited for pairs low v high in my opinion.

a strategy can be to short term trade the low PR's as thats where the action will likely exist.
surf
 
Quote from EPrado:
Sure thing old buddy...here is jwh's site
http://www.jwh.com/home.asp
click on programs and performance...
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Where's the AUM info? [Not a flame or troll -- a geniune question -- I can't find it on that page, and I did click around]

"Performance reports" have little meaning without AUM info. [Which programs have meaningful asset bases? Have there been large adds/redeems? Etc.]
 
As expected, an upday so far on Monday. I believe this is the start of a significant rally here. suggest maintaining longs at this time in the DJIA.

Expecting Gold to take out the recent lows around 740 in the near future on its way to sub 600 and lower.

stay tuned,

surf
 
Surfer's Recap from Yahoo Finance et al



Another red letter day for traders! Federal Reserve Chairman Ben Bernanke and President George Bush promoted their stimulus package with positive rhetoric, as well as hinting at further rate cuts resulting in a steep climb across the major stock indexes. The International Monetary Fund (IMF) and Russia announced a $6 billion dollar rescue plan for the collapsing Icelandic economy lifting global hopes of an optimistic end to the crisis. Stocks added to last weeks best weekly gain in 5 years by the DJIA climbing an impressive 413.21 to 9265.43, the Nasdaq soared 58.74 to 1770.03 and the broad based S&P 500 jumped 44.84 to 985.39. It is indeed heart warming to see the stimulus package starting to have its effect on the stock market.

Halliburton HAL—Led the energy complex higher by climbing 13.91% or $2.54 to $20.80/share after beating analysts profits estimates

AT&T T—Telephone, as its affectionately called on trading floors added 6.84% or $1.74 to $27.02/share due to securing a $600 million dollar contract from Tennessee to revamp the state’s phone system

Emcore EMKR—The solar power firm jumped 17.89% or .66 cents to $4.35/ share on Barron’s suggestion that the stock may hit $10.00/share if its successful with the creation and production of a more efficient solar cell

Landry’s Restaurants LNY—Soared 28.41% or $2.58 to $11.66/share after the owner of the popular Rain Forrest Café and The Crab House stated that it approved the lower $13.50/share takeover offer from the CEO

Oil added $2.81 to $74.66, gold climbed $8.80 to $796.50 and the VIX index added 4.02% to $70.33
 
Making some FX comments on various syndicated sites. If anyone here trades FX, the NZD rate decision at 4 PM EST tomorrow should prove interesting. here is a snippet from the Yahoo brief from the surfer shack:


The Event

Wednesday, October 22, 2008 at 4:00 PM EST, the Reserve Bank of New Zealand (RNBZ) will announce its rate decision.

Description

The New Zealand economy has officially been in a recession this year. This fact has spurred a series of rate cuts from the RNBZ. In June, the rhetoric began from the Bank's chief Dr. Alan Bollard advising that the economy was in a downturn, yet the interest rate was extraordinarily high at 8.25%. This dovish talk quickly triggered a 75 pip move down in the NZD/USD pair. July led to an actual rate reduction of 0.25 basis points, causing the pair to slip 25 pips immediately on the announcement. September was a big surprise with the normally conservative Bollard dropping the rates 50 basis points to 7.50 instead of the expected 25 basis point drop. This surprise led to a 185 pip down move by the end of the day in the NZD/USD.

Trader Take

This rate decision is expected to be even more severe than the last one with a 100 basis point slash, knocking the rate down to 6.50. New Zealand is truly out of step with most of the world's economies with a very high interest rate. However, some positive signs in the economy may cause Dr. Bollard to lower the rate less than expected. However, the majority of economists and traders believe that the rates will be lowered substantially, up to 200 basis points over the next year. Trend traders take note, the USD/NZD is in a clear down trend here. Any surprises to the down side in rates will serve to only accelerate the already strong trend. However, if rates are held steady or lowered much less than the severe expected 100 basis points expect a short term bounce in the pair. As with any rate decision, pay close attention to the rhetoric accompanying it, as it can move the currency even more than the actual decision in the short term.

Best Wishes!
 
Quote from marketsurfer:

As expected, an upday so far on Monday. I believe this is the start of a significant rally here. suggest maintaining longs at this time in the DJIA.

f
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