Thursday November 20, 2008
Navivest

The stock market is trading in and out of positive territory in late AM trading after opening to the downside with losses in all the major indices. While it is a bit too early to determine whether we will end up the day to the upside, we are looking for stocks to rebound if not today, then tomorrow.

Traders should start positioning themselves now by taking long positions. A rally would be broad-based, but we would just place bets on the markets overall, by buying the major indices as represented by QQQQ, SPY and DIA, which is a bet on the Dow 30 stocks.

For those looking to buy the stocks that are showing strength in a weak market, Boeing (BA), Verizon (VZ) and Walmart (WMT) are all up over a dollar, with 3% plus gains.

Tags: Stocks

Wednesday November 19, 2008
Navivest

With the rout we saw in the stock market today, that had the Dow, Nasdaq and S&P 500 shed 5.07, 6.53 and 6.12% respectively, we are hoping that the rebound that we have been looking for, will come tomorrow.

Today’s action should be a watershed that will hopefully give us a temporary bottom that we can bounce off of tomorrow.

From a technical and psychological standpoint, we do need to see some buying and a strong move to the upside tomorrow. We are already trading at levels we haven’t seen in five years and further violations of long-term support areas could result in further significant losses in shareholder wealth as those who for whatever reasons are still holding on to their stocks, decide to dump them.

If we have any buying in early trading, we would recommend getting in, so as not to miss a technical rally.

Tags: Technical Analysis  Stock Trading  Dow Nasdaq

Wednesday November 19, 2008
Navivest

We are looking for a rebound in stocks after a volatile week in trading that has seen the Dow trade in an almost 800 point range, but we’re still trading only about a hundred point lower than where we were trading last Wednesday.

We do have a somewhat active economic calendar today that could dictate the direction of the stock market – possibly downward. On tap, we have Building Permits, Housing Starts and FOMC minutes.

It is probably a safe assumption that the Building Permits and Housing Starts numbers will be disappointing, but at this stage, no one is expecting that builders were going gang busters applying for permits and putting up new housing.

So maybe the numbers could actually help stocks move to the upside, as whatever is released today, will be old news that should have been already been discounted.

Tags: Building Permits  Housing Starts  Economic Calendar

Tuesday November 18, 2008
Navivest

While we are still in a bear market and expect the stock market to be lower than it is now in the near future, we are entering oversold territory and at any point in the very near future absent of bad news, we should get another nice rebound in stocks.

With these rebounds, we see gains of as much as twenty percent in some stocks and that being the case, the aim is to also try and catch the next one.

We are looking for one sometime in the next week or too. Hopefully it does not happen in dribs and drabs.

Obviously, with the volatility in the markets, getting in too early could be a serious costly problem. So what we want to do is watch how stocks are trading and then jump in when conditions are right.

Of late, volume has been light most trading days. We want to watch for a day when we start seeing decent buying volume and an overwhelmingly positive advance decline line, that is more stocks up than down.

Also, lately, we have had an anomaly whereby crude oil and stocks move up together. In normal trading environments, rising oil prices was deemed bad for stocks and when that happened, it put pressure on equities.

Now that falling oil prices is seen as a reflection of an ailing global economy, when commodities prices do rise, it is a positive and it helps propel stocks higher. So another thing to look for would be rising commodity prices.

Once we see such a situation developing, its time to initiate long trades.

That being said, remember we are in a bear market! From a technical analysis standpoint, stocks have violated every bearish signal and are in a downward trend if we may state the obvious. Anyone going long needs to keep his in mind, and take profits as soon as you are blessed with them.

Tags: Trading Plan  Trading Idea

Monday November 17, 2008
Navivest

It was not too long ago that the investment community was actively debating whether the Federal Reserve would raise rates or not at their next scheduled meetings.

That debate is now off the table as the economy has cooled substantially and if anything, the debate is now whether the feds will continue to cut rates to spur the economy.

Tomorrow, we get the Producer Price Index numbers for October. The PPI measures the price of goods at the wholesale level.

With the state of the economy and the drop in oil prices of late, we expect to see a tame PPI.

Investors watch the PPI numbers as it helps portend the direction of interest rates.

One thing we would like to know is what Dallas Fed President Richard Fisher is thinking now. At the August 5th meeting when the FOMC voted to keep interest rates unchanged, he dissented and voted to raise rates.

We wondered then whether he could not see what was beginning to happen to the economy and that things would get worse. To us, this lack of foresight disqualifies him for his job.

Tags: PPI  Economy  Interest Rates

Monday November 17, 2008
Navivest

Friday was quite an interesting session. Almost right out of the gate, stocks trended downward and by 1PM, a quick analysis would have had traders thinking that a down day for the stock market was a foregone conclusion.

At that point, the Dow, which had opened at 8822.19 from Thursday’s 8835.25 close, was down to 8469.99.

Around 1:15 the Dow and stocks in general, started rebounding from just about the lows of the session and kept moving to the upside until about 3PM, hitting an intra-day high of 8923.18. Then things turned around again and we saw another down trend. At about 3:52 PM, just 8 minutes before the closing, things fell of a cliff and we ended the day down 337.94 on the Dow Jones Industrial Average. Nasdaq was down 5%.

Things could continue to be dicey today. On Friday, the EU officially confirmed that the fifteen nations making up the Euro zone have officially entered a recession. A recession is defined as two consecutive quarters of negative growth and the EU zone saw a 0.2% decline in both the second and third quarters.

Overnight, Monday in Japan, the Japanese Economy Minister Kaoru Yosano announced that his nation had entered into a recession.

So the news keeps getting worse and stocks will continue to reflect that.

With all the news that the global economy continues to worsen, commodity prices should continue to suffer and investors should look to short related stocks. This should be down with the understanding that we will continue to experience volatility that could send the major indices up 5-8% or even more in one day. So taking profits whenever they occur and shorting whenever we get a nice rally might be a wise course of action unless you are willing to short and hold and have the fortitude to withstand those intermittent blips.

Tags: Economy  Recession  Trading Plan
 

Friday November 14, 2008
Navivest

The U.S. Commerce Department today reported that retail sales for the month of October fell by the largest amount since they started keeping score.

According to the Commerce Department, advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $363.7 billion.

This translates into a decline of 2.8% from September to October. If automobile sales are not factored in, the decline was 2.2%

Economists had been looking for retail sales with the sales of automobiles factored out, to show a decline of 1.0% from September and a decline of 1.9% with auto sales included.

This portends more bad news for the economy, as it shows that consumer spending, which makes up the bulk of the U.S economy, continues to slow and to do so at an alarming rate.

Tags: Retail Sales  Economy

Friday November 14, 2008
Navivest

Retail stocks will be front and center today as we got earnings report from several key retailers yesterday evening.

Walmart (WMT) reported third quarter earnings that rose ten percent from the comparable period last year, on a 7.4 percent rise in revenues to $98.64 billion in the quarter. Walmart, which prides itself on its low prices, is attracting more consumers who’ve had to tighten their belts as the economy continues to falter. The company in comparison to the rest of the stock market is doing very well and is the best Dow performer this year.

Wall Street was happy with the results for the quarter, but even as the company reported a sterling quarter, it also lowered its earnings forecast for the full year.

Kohl’s (KSS) on the other hand reported a 17% drop in profits while Nordstom (JWN) reported a 57% drop in profits.

Additionally, at 8:30AM today, the Commerce Department will be reporting retail sales for the month of October. While expectations are becoming so low that the number might not come in below forecast, it will still show that the economy is in a very fragile state and getting worse. Not that we need any reminder.

Unless we get a follow-through of yesterday’s incredible gains in the stock market, we expect the retail stocks to suffer today.

Consequentially, close to the close of the stock market yesterday, we had subscribers to our Options Capitalist trading advisory service for options traders, buy the Target (TGT) November 35 puts.

As it stands, the above-mentioned stocks are down in after hours trading. We are looking for the retail report this morning to drive retail stocks down further, allowing us to close out the trade very profitably over the next two trading sessions.

We are offering a free two-week trial to the Options Capitalist. To start your free trial, click here and fill out the short form.

If Target opens down less than $1.25 and we have a negative tone in the market, traders can still enter into a short position. And as we point out on this blog so very often, take quick profits.

Tags: Retail Stocks Trading Plan

Thursday November 13, 2008
Navivest

After three consecutive down sessions, stocks might be looking to rebound today. Assuming that the lowered Q4 guidance announcement from Intel yesterday or some other bad news does not overwhelm the market, we could get a rally that feeds itself.

If stocks start moving to the upside, then investors and traders who are sitting on the sidelines might get in, which could create a buying frenzy.

Word of caution, watch the markets carefully and make sure that we do have a positive day ahead of us. Obviously if we are in store for a bullish day, you do not want to wait until the markets have rallied before getting in, but we don’t want to get caught in a bearish trap.

Wait for the first 15 to 30 minutes of trading and if stocks are up, we have decent buying volume and we have a bullish advance decline line, then we can take long positions. On the other hand, if the Dow opens up about a hundred points, then get in early.

Some good trading candidates if stocks are moving up would be Dow components Caterpillar (CAT) and 3M (MMM) and market indices such as SPDR Trust (SPY) which allows you to trade the S&P 500 stocks.

Also, oil seems to be holding steady and could move higher today which would be good for battered oil-related and commodity stocks.

If oil continues to hold, traders should also look at stocks like Apache (APA) and Anadarko Petroleum (APC). That being said, we do get crude inventory numbers today at 11AM and if we get a bearish number, that could send oil prices lower.

The long and short of things are, we are willing to make long bets today if the stock market meets our above entry criteria. Worst-case scenario, if we enter and stocks fall, that creates further impetus for stocks to move up tomorrow or Monday.

However you trade, keep in mind its still a highly volatile market, so take those early profits.

Navivest provides subscription based trading advisory services for stocks and options traders. For a free two week trial to any of our services, click here and fill out the short form.

Trading Idea  Caterpillar  3M  Trading Plan

Wednesday November 12, 2008
Navivest

Intel (INTC) after the close of the stock market today has provided fourth quarter guidance that could serve to spook if not the stock market as a whole tomorrow, then the tech sector.

It was only exactly four weeks ago on 10/14/2008 when the company issued its third quarter financial results, that Intel had forecasted Q4 revenues of between $10.1 billion and $10.9 billion

Today, it announced that it now expects fourth quarter revenue to be $9 billion, plus or minus $300 million.

According to the company, “Revenue is being affected by significantly weaker than expected demand in all geographies and market segments. In addition, the PC supply chain is aggressively reducing component inventories.”

Q4 gross margins are now expected to be 55%, plus or minus a couple points. This compares to the 59% margins that the company forecasted four weeks ago, for the period.

One “bright” note in today’s announcement, is that we may not be getting any more fourth quarter related bad news from the company. Because Intel will be reporting those Q4 results on January 15th, starting November 28th until the results are reported, the company will go into a quiet period. Of course, this then provides for the possibility that the company misses even these lowered forecasts.

Tags: Intel  Earnings  Earnings Guidance