suggest staying short here in WFC
potential exists for total takedown stay tuned, surf
potential exists for total takedown stay tuned, surf
The Surf Report
- Thread starter marketsurfer
- Start date
- Status
we are positive on several low priced stocks today--KING< SARA LEE< EARTHLINK
Ben Bernanke stated that he was fundamentally optimistic concerning the economic recovery during a speech at Atlanta's Morehouse College. Despite the Fed Chief's high spirits and Goldman Sachs blowing away earning estimates, stocks ended the day lower. Even the mighty, strong earning Goldman Sachs slipped due to investors fears of the issuing of new stock would dilute present value. Upside momentum was further stymied by weak Retail Sales figures and Wholesale Price number failing to indicate core improvement. The DJIA gave back -137.63 to 7920.18, the tech heavy Nasdaq dropped -25.59 to 1625.72 and the broad based S&P 500 fell -17.23 to 841.50.
Goldman Sachs (GS | Quote | Chart | News | PowerRating) - Shocked the investment community dropping 10.79% or $14.04 to $116.11 after blowing away earning estimates but spooked traders due to stating they will issue additional stock to pay back the TARP funds diluting value.
Macy's (M | Quote | Chart | News | PowerRating) - Weak Retail Sales figures weighed heavily on the department store giant with shares dropping 7.50% or 0.97 cents to $11.96.
WW Grainger (GWW | Quote | Chart | News | PowerRating) - Crushed analyst's profit estimates gaining 3.48% or $2.69 to $79.99/share.
General Motors (GM | Quote | Chart | News | PowerRating) - Rumors of the Feds swapping debt for an ownership stake sent shares higher 4.09% or 0.07 cents to $1.78.
Oil dropped 0.64 cents to $49.15, Gold gave back $3.80 to $892.00 and the fear VIX index fell 0.37% to 37.67 indicating confidence still remains in the market.
According to a recent report, eight out of ten securities traded are exchange-traded funds. Want to learn how to trade them? Click here to pre-order High Probability ETF Trading, the first quantified book of trading strategies to improve your ETF trading.
Market Snapshot
Dow
-137.63 7920.18
NASDAQ
-25.59 1625.72
S&P 500
-17.23 841.50
Economic News
Core PPI (Mar): Consensus: 0.1%, Prior: 0.2%
PPI (Mar): Consensus: 0.0%, Prior: 0.1%
Retail Sales (Mar): Consensus: 0.3%, Prior: -0.1%
Retail Sales ex-auto (Mar): Consensus: 0.1%, Prior: 0.7%
Business Inventories (Feb): Consensus: -1.1%, Prior: -1.1%
Core CPI (Mar): Consensus: 0.1%, Prior: 0.2%
CPI (Mar): Consensus: 0.2%, Prior: 0.4%
Empire Manufacturing (Apr): Consensus: -35.0, Prior: -38.2
Net Long-Term TIC Flows (Feb): Consensus: NA, Prior: -$43.0B
Capacity Utilization (Mar): Consensus: 69.7%, Prior: 70.9%
Industrial Production (Mar): Consensus: -0.9%, Prior: -1.4%
Crude Inventories (04/10): Consensus: NA, Prior: +1645K
Fed's Beige Book: Consensus: NA, Prior: NA
Building Permits (Mar): Consensus: 550K, Prior: 547K
Housing Starts (Mar): Consensus: 550K, Prior: 583K
Initial Claims (04/11): Consensus: NA, Prior: 654K
Philadelphia Fed (Apr): Consensus: -32.0, Prior: -35.0
Mich Sentiment-Prel (Apr): Consensus: 58.5, Prior: 57.3
Ben Bernanke stated that he was fundamentally optimistic concerning the economic recovery during a speech at Atlanta's Morehouse College. Despite the Fed Chief's high spirits and Goldman Sachs blowing away earning estimates, stocks ended the day lower. Even the mighty, strong earning Goldman Sachs slipped due to investors fears of the issuing of new stock would dilute present value. Upside momentum was further stymied by weak Retail Sales figures and Wholesale Price number failing to indicate core improvement. The DJIA gave back -137.63 to 7920.18, the tech heavy Nasdaq dropped -25.59 to 1625.72 and the broad based S&P 500 fell -17.23 to 841.50.
Goldman Sachs (GS | Quote | Chart | News | PowerRating) - Shocked the investment community dropping 10.79% or $14.04 to $116.11 after blowing away earning estimates but spooked traders due to stating they will issue additional stock to pay back the TARP funds diluting value.
Macy's (M | Quote | Chart | News | PowerRating) - Weak Retail Sales figures weighed heavily on the department store giant with shares dropping 7.50% or 0.97 cents to $11.96.
WW Grainger (GWW | Quote | Chart | News | PowerRating) - Crushed analyst's profit estimates gaining 3.48% or $2.69 to $79.99/share.
General Motors (GM | Quote | Chart | News | PowerRating) - Rumors of the Feds swapping debt for an ownership stake sent shares higher 4.09% or 0.07 cents to $1.78.
Oil dropped 0.64 cents to $49.15, Gold gave back $3.80 to $892.00 and the fear VIX index fell 0.37% to 37.67 indicating confidence still remains in the market.
According to a recent report, eight out of ten securities traded are exchange-traded funds. Want to learn how to trade them? Click here to pre-order High Probability ETF Trading, the first quantified book of trading strategies to improve your ETF trading.
Market Snapshot
Dow
-137.63 7920.18
NASDAQ
-25.59 1625.72
S&P 500
-17.23 841.50
Economic News
Core PPI (Mar): Consensus: 0.1%, Prior: 0.2%
PPI (Mar): Consensus: 0.0%, Prior: 0.1%
Retail Sales (Mar): Consensus: 0.3%, Prior: -0.1%
Retail Sales ex-auto (Mar): Consensus: 0.1%, Prior: 0.7%
Business Inventories (Feb): Consensus: -1.1%, Prior: -1.1%
Core CPI (Mar): Consensus: 0.1%, Prior: 0.2%
CPI (Mar): Consensus: 0.2%, Prior: 0.4%
Empire Manufacturing (Apr): Consensus: -35.0, Prior: -38.2
Net Long-Term TIC Flows (Feb): Consensus: NA, Prior: -$43.0B
Capacity Utilization (Mar): Consensus: 69.7%, Prior: 70.9%
Industrial Production (Mar): Consensus: -0.9%, Prior: -1.4%
Crude Inventories (04/10): Consensus: NA, Prior: +1645K
Fed's Beige Book: Consensus: NA, Prior: NA
Building Permits (Mar): Consensus: 550K, Prior: 547K
Housing Starts (Mar): Consensus: 550K, Prior: 583K
Initial Claims (04/11): Consensus: NA, Prior: 654K
Philadelphia Fed (Apr): Consensus: -32.0, Prior: -35.0
Mich Sentiment-Prel (Apr): Consensus: 58.5, Prior: 57.3
Suggest holding WFC short here.
surf
surf
Barbie Doll Breakout, Confidence Climbs, Hedgie Fisher Optimistic
Stocks climbed to their 6th straight weekly gain as the Consumer Confidence figures climbed and stronger than expected bank earnings triggered buying. Supporting the Consumer Confidence figure, sales of the lovely and boom time eponymous Barbie Doll surged 18% in the first quarter pushing her maker, Mattel shares higher. Adding to the optimistic tone of the session, billionaire investor, Ken Fisher stated that the current rally is too big to simply be a bear market bounce and stocks are the cheapest in anyone's lifetime. The DJIA snapped higher by +5.90 to 8131.33, the Nasdaq eased ahead by +2.63 to 1673.07 and the S&P 500 advanced +4.30 to 869.60.
Mattel (MAT | Quote | Chart | News | PowerRating) - Its famous Barbie Doll toy posted an 18% sales gain in the 1st quarter resulting in shares breaking out 15.20% or $1.98 to $15.01/share.
BB & T (BBT | Quote | Chart | News | PowerRating) - The bank made clear statements that it is well capitalized and housing markets in its regions are improving luring buyers to push shares higher by 11.15% or $2.35 to $23.42/share.
Tempur Pedic (TPX | Quote | Chart | News | PowerRating) - A maker of luxury mattresses beat analysts earning estimates pushing shares higher by 17.36% or $1.59 to $10.75/share.
Intuitive Surgical (ISRG | Quote | Chart | News | PowerRating) - Climbed 10.47% or $12.35 to $130.35 after being upgraded by Brean Murray Carret & Co.
Gold continued its losing streak dropping $11.90 to $867.90, Oil eased ahead by 0.35 cents to $50.23 and volatility continues to dry up with the VIX fear index falling another 5.17% to 33.94.
Stocks climbed to their 6th straight weekly gain as the Consumer Confidence figures climbed and stronger than expected bank earnings triggered buying. Supporting the Consumer Confidence figure, sales of the lovely and boom time eponymous Barbie Doll surged 18% in the first quarter pushing her maker, Mattel shares higher. Adding to the optimistic tone of the session, billionaire investor, Ken Fisher stated that the current rally is too big to simply be a bear market bounce and stocks are the cheapest in anyone's lifetime. The DJIA snapped higher by +5.90 to 8131.33, the Nasdaq eased ahead by +2.63 to 1673.07 and the S&P 500 advanced +4.30 to 869.60.
Mattel (MAT | Quote | Chart | News | PowerRating) - Its famous Barbie Doll toy posted an 18% sales gain in the 1st quarter resulting in shares breaking out 15.20% or $1.98 to $15.01/share.
BB & T (BBT | Quote | Chart | News | PowerRating) - The bank made clear statements that it is well capitalized and housing markets in its regions are improving luring buyers to push shares higher by 11.15% or $2.35 to $23.42/share.
Tempur Pedic (TPX | Quote | Chart | News | PowerRating) - A maker of luxury mattresses beat analysts earning estimates pushing shares higher by 17.36% or $1.59 to $10.75/share.
Intuitive Surgical (ISRG | Quote | Chart | News | PowerRating) - Climbed 10.47% or $12.35 to $130.35 after being upgraded by Brean Murray Carret & Co.
Gold continued its losing streak dropping $11.90 to $867.90, Oil eased ahead by 0.35 cents to $50.23 and volatility continues to dry up with the VIX fear index falling another 5.17% to 33.94.
Suggest holding shorts in WFC here. watching C closely for entry LONG in next several weeks maybe....
no changes, looking for sub 10 in WFC WFC
thanks,
surf
no changes, looking for sub 10 in WFC WFC
thanks,
surf
An intense week for investors with important economic reports and earning releases flooding the news wires. Monday saw the banking sector surging as optimism triggered by Wells Fargo's earnings lifted the other banks. However, negative news from Wells Fargo dampened the enthusiasm leading to a mixed closed. Another day of lack luster losses struck Tuesday despite Goldman Sachs blowing away earning estimates.
A rally was ignited midweek as the Fed's Beige Book indicated the economy may finally be stabilizing with the worst being over. Stocks continued their upward momentum into Thursday as expectations of strong earnings and solid economic news bolstered the positive atmosphere. The market readily discounted extremely negative news of a giant shopping mall owner declaring bankruptcy leading into a lack luster open on Friday. Better than expected results from Citigroup and General Electric failed to generate a rally by midday on the last trading day of the week.
Despite the chaotic week, many analysts are claiming that the bottom, at least a short term one, has been established. It was obvious that eventually the trillions of dollars on the sidelines would be put to work and the government stimulus would start to yield positive results. It is indeed probable that we are seeing the fruits of ultra low valuations attracting capital back into equities. However, no one knows for sure how long this positive vibe will last. Therefore, conservative and prudent long term investors need proven tools to choose the stocks most likely to benefit positively from the situation.
Let's take a look at several of the featured PowerRated stocks this week:
EarthLink (NasdaqGS:ELNK - News) - A former PowerRating Stock Spotlight feature, this sub $10.00 stock is the number one rated low priced company on our screener. This internet boom survivor has earned a 5 Long Term PowerRating and has been in a solid, albeit erratic uptrend since March 9th. Price is above the 50-day SMA but have recently met resistance at the 200-day SMA presently resting at $7.43/share. Strong results in 2008 including record Total Year Income and Free Cash Flow build a solid fundamental picture. First quarter results are scheduled for release at 7:00 AM EDT on Tuesday, April 28th.
King Pharmaceuticals (NYSE:KG - News) - This 4 Long Term PowerRated company is the second highest ranked low priced stock on our screener. They took over Alpharma Inc. in 2008 depressing the fundamental picture as well as incurring special charges for research and development. The CEO called 2008 a transformation year and is providing strong guidance into the future. 4 new drug applications were submitted to the FDA during 2008 which bodes well for the company's potential. Technically, shares have just broken above the 50-day SMA but have hit resistance at $8.00.
Sara Lee (NYSE:SLE - News) - A favorite food, beverage and body care company of millions of consumers has earned a 4 Long Term PowerRating. Very strong North American Net Sales in 2009's fiscal second quarter were negatively offset by dropping international sales. As can be expected, the fresh bakery and retail divisions led the way for the North American sales increase. Technically, shares just broke above the 50-day SMA but have found resistance at $8.75.
Johnson & Johnson (NYSE:JNJ - News) - This pharmaceutical giant has earned a 7 Long Term PowerRating placing it as the number 1 stock in the Dow Jones Industrial Average. They just releases 1st quarter results with declines across the major fundamental metrics. Sales were down 7.2%, negative currency impact of 12.6% and Net Earnings took a 2.5% hit. However, EPS matched last year at $1.26 and the company reconfirmed its earning guidance of $4.45 to $4.55/share for 2009. The CEO, William Weldon, sounded very optimistic about 2009 despite the slightly negative results. Technically, shares have found resistance at the 50-day SMA, pulling back from a high in the $54.00/share area. Another assault on the 50-day SMA at $52.67 appears to have started today. If price breaks above this level, the next technical resistance is at $58.00/share prior to the 200-day SMA at $60.28/share.
Bristol Myers Squibb (NYSE:BMY - News) - A 4 Long Term PowerRated pharmaceutical stock is among the most requested today. They posted strong 2008 results with Net sales being up 4% and Gross Profit improving by 5%. Positive guidance was provided into 2009 and a dividend was just announced. Technically, shares up trended since March, 2nd but hit solid resistance at approximately $22.50/share after trading above the 50 and 200-day SMA's. Price has since broke back below the major SMA's which are currently hugging each other at 20.42 and 20.45 respectively.
Advance Auto Parts (NYSE:AAP - News) - This auto part retailer has earned a 4 Long Term PowerRating and is the 10th most requested stock on our screener. The company turned in solid fiscal 4th quarter results with Comparable Store Sales being up 3% and a record Free Cash Flow figure. The firm plans on divesting 40 to 55 stores in 2009 which should increase the bottom line as the non performing stores are cut. Technically, a nice up trend since January 20th has taken shares above the 50 and 200-day SMA's. However, resistance appears to have been formed at the $42.00/share level.
Stocks In The News
Here is an assortment of names catching my eye this week.
Rosetta Stone (NYSE:RST - News) - The language learning software company debuted on the exchange today surging 41% from IPO price.
Plexus Corp (NasdaqGS
LXS - News) - Soared after reaffirming its earnings.
Emergent BioSolutions (NYSE:EBS - News) - A maker of Anthrax vaccine dropped after being required to submit an outline to the FDA.
Harley Davidson (NYSE:HOG - News) - Blew away earnings estimates triggering the stock to climb.
DR Horton (NYSE
HI - News) - Advanced after positive data on builder confident emerged today.
Intel (NasdaqGS:INTC - News) - Declined due to not providing guidance into 2009 despite posting stellar results earlier.
Starbucks (NasdaqGS:SBUX - News) - The ubiquitous coffee chain fell upon being downgraded by Deutsche Bank.
Raymond James (NYSE:RJF - News) - The largest U.S. regional stock brokerage house fell after stating its 2nd quarter results will be well below analyst's estimates.
This Week's Top Performers
OfficeMax (NYSE:OMX - News)
Regions Financial (NYSE:RF - News)
Dendreon Corp. (NasdaqGMNDN - News)
This Week's Worst Performers
Burger King (NYSE:BKC - News)
The9 Ltd (NasdaqGS:NCTY - News)
Hosp Prop (NYSE:HPT - News)
What To Look For Next Week
Monday: Leading Indicators
Wednesday: Crude Inventories
Thursday: Initial Claims, Existing Home Sales
Friday: New Home Sales, Durable Orders
A rally was ignited midweek as the Fed's Beige Book indicated the economy may finally be stabilizing with the worst being over. Stocks continued their upward momentum into Thursday as expectations of strong earnings and solid economic news bolstered the positive atmosphere. The market readily discounted extremely negative news of a giant shopping mall owner declaring bankruptcy leading into a lack luster open on Friday. Better than expected results from Citigroup and General Electric failed to generate a rally by midday on the last trading day of the week.
Despite the chaotic week, many analysts are claiming that the bottom, at least a short term one, has been established. It was obvious that eventually the trillions of dollars on the sidelines would be put to work and the government stimulus would start to yield positive results. It is indeed probable that we are seeing the fruits of ultra low valuations attracting capital back into equities. However, no one knows for sure how long this positive vibe will last. Therefore, conservative and prudent long term investors need proven tools to choose the stocks most likely to benefit positively from the situation.
Let's take a look at several of the featured PowerRated stocks this week:
EarthLink (NasdaqGS:ELNK - News) - A former PowerRating Stock Spotlight feature, this sub $10.00 stock is the number one rated low priced company on our screener. This internet boom survivor has earned a 5 Long Term PowerRating and has been in a solid, albeit erratic uptrend since March 9th. Price is above the 50-day SMA but have recently met resistance at the 200-day SMA presently resting at $7.43/share. Strong results in 2008 including record Total Year Income and Free Cash Flow build a solid fundamental picture. First quarter results are scheduled for release at 7:00 AM EDT on Tuesday, April 28th.
King Pharmaceuticals (NYSE:KG - News) - This 4 Long Term PowerRated company is the second highest ranked low priced stock on our screener. They took over Alpharma Inc. in 2008 depressing the fundamental picture as well as incurring special charges for research and development. The CEO called 2008 a transformation year and is providing strong guidance into the future. 4 new drug applications were submitted to the FDA during 2008 which bodes well for the company's potential. Technically, shares have just broken above the 50-day SMA but have hit resistance at $8.00.
Sara Lee (NYSE:SLE - News) - A favorite food, beverage and body care company of millions of consumers has earned a 4 Long Term PowerRating. Very strong North American Net Sales in 2009's fiscal second quarter were negatively offset by dropping international sales. As can be expected, the fresh bakery and retail divisions led the way for the North American sales increase. Technically, shares just broke above the 50-day SMA but have found resistance at $8.75.
Johnson & Johnson (NYSE:JNJ - News) - This pharmaceutical giant has earned a 7 Long Term PowerRating placing it as the number 1 stock in the Dow Jones Industrial Average. They just releases 1st quarter results with declines across the major fundamental metrics. Sales were down 7.2%, negative currency impact of 12.6% and Net Earnings took a 2.5% hit. However, EPS matched last year at $1.26 and the company reconfirmed its earning guidance of $4.45 to $4.55/share for 2009. The CEO, William Weldon, sounded very optimistic about 2009 despite the slightly negative results. Technically, shares have found resistance at the 50-day SMA, pulling back from a high in the $54.00/share area. Another assault on the 50-day SMA at $52.67 appears to have started today. If price breaks above this level, the next technical resistance is at $58.00/share prior to the 200-day SMA at $60.28/share.
Bristol Myers Squibb (NYSE:BMY - News) - A 4 Long Term PowerRated pharmaceutical stock is among the most requested today. They posted strong 2008 results with Net sales being up 4% and Gross Profit improving by 5%. Positive guidance was provided into 2009 and a dividend was just announced. Technically, shares up trended since March, 2nd but hit solid resistance at approximately $22.50/share after trading above the 50 and 200-day SMA's. Price has since broke back below the major SMA's which are currently hugging each other at 20.42 and 20.45 respectively.
Advance Auto Parts (NYSE:AAP - News) - This auto part retailer has earned a 4 Long Term PowerRating and is the 10th most requested stock on our screener. The company turned in solid fiscal 4th quarter results with Comparable Store Sales being up 3% and a record Free Cash Flow figure. The firm plans on divesting 40 to 55 stores in 2009 which should increase the bottom line as the non performing stores are cut. Technically, a nice up trend since January 20th has taken shares above the 50 and 200-day SMA's. However, resistance appears to have been formed at the $42.00/share level.
Stocks In The News
Here is an assortment of names catching my eye this week.
Rosetta Stone (NYSE:RST - News) - The language learning software company debuted on the exchange today surging 41% from IPO price.
Plexus Corp (NasdaqGS
LXS - News) - Soared after reaffirming its earnings.Emergent BioSolutions (NYSE:EBS - News) - A maker of Anthrax vaccine dropped after being required to submit an outline to the FDA.
Harley Davidson (NYSE:HOG - News) - Blew away earnings estimates triggering the stock to climb.
DR Horton (NYSE
HI - News) - Advanced after positive data on builder confident emerged today.Intel (NasdaqGS:INTC - News) - Declined due to not providing guidance into 2009 despite posting stellar results earlier.
Starbucks (NasdaqGS:SBUX - News) - The ubiquitous coffee chain fell upon being downgraded by Deutsche Bank.
Raymond James (NYSE:RJF - News) - The largest U.S. regional stock brokerage house fell after stating its 2nd quarter results will be well below analyst's estimates.
This Week's Top Performers
OfficeMax (NYSE:OMX - News)
Regions Financial (NYSE:RF - News)
Dendreon Corp. (NasdaqGM
NDN - News)This Week's Worst Performers
Burger King (NYSE:BKC - News)
The9 Ltd (NasdaqGS:NCTY - News)
Hosp Prop (NYSE:HPT - News)
What To Look For Next Week
Monday: Leading Indicators
Wednesday: Crude Inventories
Thursday: Initial Claims, Existing Home Sales
Friday: New Home Sales, Durable Orders
Cold rain and driving wind pummeled the New York Stock Exchange today as the bastion of American capitalism sold off after a six week rally. The Volatility Index or VIX surged over 15% as investors raced to purchase insurance against further declines in the form of derivatives. The financial sector led the decline due to deep internal issues overshadowing the positive earning reports. Despite the dark, pessimism .......
Why Contrarians Make Money And Trend Chasers Lose Money
Friday April 17, 11:33 am ET
By Simon Maierhofer
Don't you hate being left out? Going against the grain is usually the unpopular direction to go. Nobody likes to be the oddball out. For the sake of popularity, humans tend to conform to the general trend eventually, especially if the trend continues to persist.
ADVERTISEMENT
As it turns out, when it comes to investing, being the oddball is much more profitable. Oddballs in the investment community are considered contrarians and contrarian investors have been one of the few to actually book profits over the past year or so.
If you are willing to exchange some of your trend conforming popularity in return for profitability (don't worry, making money will once again increase your popularity score), this article is for you.
Trend chasing - a losing proposition
Most investors - novices and pros alike - rely on news and news- based forecasts to make their buy/sell decisions. News is always good at the top and bad at the bottom. Excessively bullish news will trick you into the market before it falls, excessively bad news will squeeze you out of the market before it bounces.
Here are a few examples to illustrate what I mean: Equity mutual fund cash reserves reached an all-time low of only 3.5% just before the market topped in October 2007. This means that 96.5% of mutual fund managed assets got to participate in the decline that followed.
Broad index funds such as the Dow Jones (NYSEArca: DIA - News), S&P 500 (NYSEArca: SPY - News) and Russell 1000 (NYSEArca: IWB - News) lost over 50% from top to bottom. Most actively managed mutual funds did even worse. Why? Because fund managers based their decisions on positive news.
In the fall of 2008, the Federal Pension Benefit Guaranty Corporation shifted most of its $65 billion in assets from bonds to stocks and real estate. This move came just before the bear's attack intensified.
In 2007, companies belonging to the S&P 500 index spent a record $590 billion repurchasing their own shares. On average, this buy-back decision resulted in a 50% loss. Index components like General Electric (NYSE: GE - News) and JP Morgan (NYSE: JPM - News) did much worse than the broader market.
General Properties (NYSE: GGP - News), one of the largest mall operators in the states, had to file for Chapter 11 bankruptcy protection due to its aggressive and overleveraged expansion at the height of the real estate boom.
Yes, as the example of General Properties and once highflying homebuilders (NYSEArca: XHB - News) shows, trend chasing is actually the root cause for the financial and economic meltdown. The fear of losing out on profits caused even the most prudent investors and business men to throw caution to the wind.
As Ben Stein commented in the New York Times, nearly all of us are part of creating the prevailing trend, which inevitably turns against its creators. Ben noted that 'almost all economic pundits and soothsayers - whether on television, in newspapers, or at brokerage firms - are asked to tell the future. Some of them are stunningly well paid for their efforts, even though they are wrong decade after decade. Yet, we cry out for someone to tell us the future, like children who want to hear the end of the story.'
If you are looking for a crystal ball of what the future holds - as long as it relates to equities and economics - resisting your urges and swimming against the current is your best bet.
Easier said than done
As so often, this is easier said than done. Certain people, perhaps even prior contrarians with a stellar reputation and brilliant mind, may abandon their out of the box views and conform to the general trend tempting you to do the same.
Crispin Odey, a London hedge-fund manager who gained fame and money by shorting U.K. banks, has switched teams and is now cheering for the bulls. After being short for most of 2008, Mr. Odey started to accumulate bank stocks again earlier in 2009. The SPDR KBW Bank ETF (NYSEArca: KBE - News) is the U.S. cousin to U.K. bank stocks.
On a larger scale, even Mr. Roubini, one of the few economists who predicted the real estate meltdown and Mr. Soros, the billionaire investor who came out of retirement to steer his Quantum fund to an 8% gain in 2008, believe that the worst is over. Albeit slow, they expect an economic recovery to begin over the next year or two.
Like sand on the beach
Look around and you'll see that economic forecasts are as abundant as sand on the beach, and they are worth just as much. It is tough to find a precious gem (an accurate forecast) amidst worthless sand.
To further illustrate the folly of news and news based forecasts, consider this: On March 9th, the day the market bottomed, the Wall Street Journal featured an article called 'Dow 5,000 - There's a Case For It.'
True, there might be a case for it eventually (more about that below), but as it turned out, the market decided that March 9th was not the time and place in history.
In fact, just a few days earlier, on March 2nd, the ETF Profit Strategy Newsletter sent out a Trend Change Alert recommending ETFs that benefit from a rising market. Such ETFs included traditional broad market index ETFs, dividend ETFs, sector ETFs like the Financial Select Sector SPDRs (NYSEArca: XLF - News) and leveraged ETFs such as the Ultra Dow Jones ProShares (NYSEArca: DDM - News) and Direxion Large Cap Bull (NYSEArca: BGU - News).
Back to the folly of a news-driven market; Wells Fargo's (NYSE: WFC - News) positive earnings report sent stocks soaring last week while Goldman Sachs' (NYSE: GS - News) earnings surprise this week was greeted with indifference. If news drives the market, why does the market react differently to essentially the same piece of news?
The profit prophet
The ETF Profit Strategy Newsletter has often referred to the inverse effect investor sentiment tends to have on the market's performance. On December 15th for example, it noted the following: 'Optimistic sentiment, which should be more visible above Dow 9,000, will give way to further declines. At this point, the best target for a temporary low is 6,700 for the Dow and 700 for the S&P 500. Extreme pessimistic sentiment may drive the indexes even towards Dow 6,000 and S&P 600.'
The beginning of January, right about when investors started to feel comfortable with the market's future prospects again, proved to be the time to load up on short ETFs such as the UltraShort Dow Jones ProShares (NYSEArca: DXD - News), UltraShort MidCap ProShares (NYSEArca: MZZ - News), Direxion Large Cap Bear (NYSEArca: BGZ - News) and many more.
Economists and market analysts often use projected growth and earnings numbers as foundation for their forecasts. We have found that using projected numbers does not deliver accurate results. 'Projected' implies the possibility and often probability of change. Who wants to hear after the fact, 'sorry, we had to adjust our forecast because things got worse than expected?'
The market's built-in indicators
Most people don't know this, but the stock market has several built in indicators visible to the naked eye. Just like a fever is the body's way to let you know something's wrong, the stock market's internal indicators are telling investors whether its current valuations are 'healthy or sick.'
While it does take some common sense to interpret the market's symptoms, you don't need to be a Doctor or rocket scientist to figure them out.
Dividend yields, P/E ratios and investor sentiment are the market's way of letting us know what's going on. An analysis of the above three indicators reveals that the stock market does not bottom until dividend yields, P/E ratios and investor sentiment reach certain levels, just like your body is telling you that you won't be fine until your temperature calibrates back to about 98.6 degrees.
An in-depth analysis of the above three indicators along with the Dow Jones measured in the only true currency, gold is available in the March issue of the ETF Profit Strategy Newsletter. The results show that contrarians will continue to be the ones raking in profits.
Friday April 17, 11:33 am ET
By Simon Maierhofer
Don't you hate being left out? Going against the grain is usually the unpopular direction to go. Nobody likes to be the oddball out. For the sake of popularity, humans tend to conform to the general trend eventually, especially if the trend continues to persist.
ADVERTISEMENT
As it turns out, when it comes to investing, being the oddball is much more profitable. Oddballs in the investment community are considered contrarians and contrarian investors have been one of the few to actually book profits over the past year or so.
If you are willing to exchange some of your trend conforming popularity in return for profitability (don't worry, making money will once again increase your popularity score), this article is for you.
Trend chasing - a losing proposition
Most investors - novices and pros alike - rely on news and news- based forecasts to make their buy/sell decisions. News is always good at the top and bad at the bottom. Excessively bullish news will trick you into the market before it falls, excessively bad news will squeeze you out of the market before it bounces.
Here are a few examples to illustrate what I mean: Equity mutual fund cash reserves reached an all-time low of only 3.5% just before the market topped in October 2007. This means that 96.5% of mutual fund managed assets got to participate in the decline that followed.
Broad index funds such as the Dow Jones (NYSEArca: DIA - News), S&P 500 (NYSEArca: SPY - News) and Russell 1000 (NYSEArca: IWB - News) lost over 50% from top to bottom. Most actively managed mutual funds did even worse. Why? Because fund managers based their decisions on positive news.
In the fall of 2008, the Federal Pension Benefit Guaranty Corporation shifted most of its $65 billion in assets from bonds to stocks and real estate. This move came just before the bear's attack intensified.
In 2007, companies belonging to the S&P 500 index spent a record $590 billion repurchasing their own shares. On average, this buy-back decision resulted in a 50% loss. Index components like General Electric (NYSE: GE - News) and JP Morgan (NYSE: JPM - News) did much worse than the broader market.
General Properties (NYSE: GGP - News), one of the largest mall operators in the states, had to file for Chapter 11 bankruptcy protection due to its aggressive and overleveraged expansion at the height of the real estate boom.
Yes, as the example of General Properties and once highflying homebuilders (NYSEArca: XHB - News) shows, trend chasing is actually the root cause for the financial and economic meltdown. The fear of losing out on profits caused even the most prudent investors and business men to throw caution to the wind.
As Ben Stein commented in the New York Times, nearly all of us are part of creating the prevailing trend, which inevitably turns against its creators. Ben noted that 'almost all economic pundits and soothsayers - whether on television, in newspapers, or at brokerage firms - are asked to tell the future. Some of them are stunningly well paid for their efforts, even though they are wrong decade after decade. Yet, we cry out for someone to tell us the future, like children who want to hear the end of the story.'
If you are looking for a crystal ball of what the future holds - as long as it relates to equities and economics - resisting your urges and swimming against the current is your best bet.
Easier said than done
As so often, this is easier said than done. Certain people, perhaps even prior contrarians with a stellar reputation and brilliant mind, may abandon their out of the box views and conform to the general trend tempting you to do the same.
Crispin Odey, a London hedge-fund manager who gained fame and money by shorting U.K. banks, has switched teams and is now cheering for the bulls. After being short for most of 2008, Mr. Odey started to accumulate bank stocks again earlier in 2009. The SPDR KBW Bank ETF (NYSEArca: KBE - News) is the U.S. cousin to U.K. bank stocks.
On a larger scale, even Mr. Roubini, one of the few economists who predicted the real estate meltdown and Mr. Soros, the billionaire investor who came out of retirement to steer his Quantum fund to an 8% gain in 2008, believe that the worst is over. Albeit slow, they expect an economic recovery to begin over the next year or two.
Like sand on the beach
Look around and you'll see that economic forecasts are as abundant as sand on the beach, and they are worth just as much. It is tough to find a precious gem (an accurate forecast) amidst worthless sand.
To further illustrate the folly of news and news based forecasts, consider this: On March 9th, the day the market bottomed, the Wall Street Journal featured an article called 'Dow 5,000 - There's a Case For It.'
True, there might be a case for it eventually (more about that below), but as it turned out, the market decided that March 9th was not the time and place in history.
In fact, just a few days earlier, on March 2nd, the ETF Profit Strategy Newsletter sent out a Trend Change Alert recommending ETFs that benefit from a rising market. Such ETFs included traditional broad market index ETFs, dividend ETFs, sector ETFs like the Financial Select Sector SPDRs (NYSEArca: XLF - News) and leveraged ETFs such as the Ultra Dow Jones ProShares (NYSEArca: DDM - News) and Direxion Large Cap Bull (NYSEArca: BGU - News).
Back to the folly of a news-driven market; Wells Fargo's (NYSE: WFC - News) positive earnings report sent stocks soaring last week while Goldman Sachs' (NYSE: GS - News) earnings surprise this week was greeted with indifference. If news drives the market, why does the market react differently to essentially the same piece of news?
The profit prophet
The ETF Profit Strategy Newsletter has often referred to the inverse effect investor sentiment tends to have on the market's performance. On December 15th for example, it noted the following: 'Optimistic sentiment, which should be more visible above Dow 9,000, will give way to further declines. At this point, the best target for a temporary low is 6,700 for the Dow and 700 for the S&P 500. Extreme pessimistic sentiment may drive the indexes even towards Dow 6,000 and S&P 600.'
The beginning of January, right about when investors started to feel comfortable with the market's future prospects again, proved to be the time to load up on short ETFs such as the UltraShort Dow Jones ProShares (NYSEArca: DXD - News), UltraShort MidCap ProShares (NYSEArca: MZZ - News), Direxion Large Cap Bear (NYSEArca: BGZ - News) and many more.
Economists and market analysts often use projected growth and earnings numbers as foundation for their forecasts. We have found that using projected numbers does not deliver accurate results. 'Projected' implies the possibility and often probability of change. Who wants to hear after the fact, 'sorry, we had to adjust our forecast because things got worse than expected?'
The market's built-in indicators
Most people don't know this, but the stock market has several built in indicators visible to the naked eye. Just like a fever is the body's way to let you know something's wrong, the stock market's internal indicators are telling investors whether its current valuations are 'healthy or sick.'
While it does take some common sense to interpret the market's symptoms, you don't need to be a Doctor or rocket scientist to figure them out.
Dividend yields, P/E ratios and investor sentiment are the market's way of letting us know what's going on. An analysis of the above three indicators reveals that the stock market does not bottom until dividend yields, P/E ratios and investor sentiment reach certain levels, just like your body is telling you that you won't be fine until your temperature calibrates back to about 98.6 degrees.
An in-depth analysis of the above three indicators along with the Dow Jones measured in the only true currency, gold is available in the March issue of the ETF Profit Strategy Newsletter. The results show that contrarians will continue to be the ones raking in profits.
Well I have been getting my feet wet last 5 weeks....but after this week I am going all in long...
this week ! $67 Billion in M&E alone !
Apple beats
Mcd's Beats
Housing up 1st time in how long? 2 years?
Banks are so so..but ok
I bought as follows;
15% on dow
25% s & p
10% Nasda
30 in Indonesia- grab Bakrie stocks any! such as ENRG.jk,Bumi.jk,BNBR.jk and so on...a good bank (not bakrie) is BBNI.jk
20% in India same as indo find good family companys.
go long...
Oh and one thing we are seeing in terms of oil...the low demand in not from the recession its the fact that almost all of USA has gone green and opting for less ....
this week ! $67 Billion in M&E alone !
Apple beats
Mcd's Beats
Housing up 1st time in how long? 2 years?
Banks are so so..but ok
I bought as follows;
15% on dow
25% s & p
10% Nasda
30 in Indonesia- grab Bakrie stocks any! such as ENRG.jk,Bumi.jk,BNBR.jk and so on...a good bank (not bakrie) is BBNI.jk
20% in India same as indo find good family companys.
go long...
Oh and one thing we are seeing in terms of oil...the low demand in not from the recession its the fact that almost all of USA has gone green and opting for less ....
i think this says it all.....take everything witha grain of salt...
When considering economic forecasts, one way to see through the fog is to focus on long-term consensus outlooks. You have a better chance of predicting the future accurately if you plan for it to fall within a range of outcomes rather than relying on a single economist's opinion. The Livingston Survey, the oldest continuous survey of economists' expectations, is a good source for consensus data.
When it comes to market pundits, because of the way the industry is structured, it's difficult to find a pundit who is not biased. For example, an expert who manages or sells equities or equity funds will typically have a more positive outlook, while managers of bear market funds, short funds and even bond funds may tend to be a little more negative on the market.
Finding a credible stock pundit is even more difficult, even after the effects of SOX. Some sources that have a reputation for being independent include Standard and Poor's and Value Line. While no single source is perfect, these firms are a good place to start when comparing stock pundits' opinions and ratings.
Conclusion
Financial pundits have been around for a long time and will most likely continue to dominate the financial news for the foreseeable future. Some have a successful history of calling market or economic swings, and others might just be guessing. Either way, pundits sometimes provide valuable information and, on occasion, some entertainment. To get the best information available, it's wise to take in outlooks from surveys or multiple sources and draw your own conclusions based on the outlooks with the soundest principles.
When considering economic forecasts, one way to see through the fog is to focus on long-term consensus outlooks. You have a better chance of predicting the future accurately if you plan for it to fall within a range of outcomes rather than relying on a single economist's opinion. The Livingston Survey, the oldest continuous survey of economists' expectations, is a good source for consensus data.
When it comes to market pundits, because of the way the industry is structured, it's difficult to find a pundit who is not biased. For example, an expert who manages or sells equities or equity funds will typically have a more positive outlook, while managers of bear market funds, short funds and even bond funds may tend to be a little more negative on the market.
Finding a credible stock pundit is even more difficult, even after the effects of SOX. Some sources that have a reputation for being independent include Standard and Poor's and Value Line. While no single source is perfect, these firms are a good place to start when comparing stock pundits' opinions and ratings.
Conclusion
Financial pundits have been around for a long time and will most likely continue to dominate the financial news for the foreseeable future. Some have a successful history of calling market or economic swings, and others might just be guessing. Either way, pundits sometimes provide valuable information and, on occasion, some entertainment. To get the best information available, it's wise to take in outlooks from surveys or multiple sources and draw your own conclusions based on the outlooks with the soundest principles.
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