July 11th, 2010 — Economy, Investing, Trading
Earnings season is right around the corner and stock are deeply oversold. So, is now the time to buy or should you wait until after earnings are reported? Is now the time to buy and wait for a quick pop from earnings or should you wait until earnings disappoint and buy the sell-off?
Many stocks are trading at single digit P/E ratios and valuations that make the market look cheap. Although I am not too much into fundamental investing, I have to consider fundamentals when trading. Value investors are working overtime right now trying to distinguish whether these valuations are of actual value or whether they are pointing to a weaker earnings outlook.
What Am I Doing?
Sitting it out for now. If I am not in the market, I can’t lose money. I see companies hoarding cash, retailers reporting mixed numbers, employment not improving, and terrible housing data. The technicals of the markets say there is more room to the downside but with any earnings season around the corner, volatility is the only certain thing in the markets. Some stocks will win and others will lose, I will sit on the sidelines and wait.
Other Articles You Might Find Interesting:
- Tags: Economy, Investing, Market Commentary, Trading
April 12th, 2010 — Market Commentary
The Dow Jones Industrial Average finally crosses 11,000. What does it mean for the future of the markets and their direction? After finally reaching and closing above the much anticipated 11,000 mark, what’s the trade now? What does Dow 11,000 mean?
Fundamental Meaning
In a simple explanation, the market has just got more expensive. The Dow closing above 11,000 means nothing fundamentally. Don’t shy away the markets because they just got more expensive as the first company, Alcoa (AA), reported its quarterly earnings after the market close today. If earnings come in strong, then the market could be undervalued and send the market higher.
Technical Meaning
For technical traders, the Dow closing above 11,000 means almost nothing. So, what does it mean? Technical traders like round numbers. Other than that, the trend is still moving higher.
Psychological Meaning
This is probably the biggest meaning of the Dow crossing 11,000. It’s nothing more than a psychological number. With every movement higher, retail investors start feeling more and more confident about dipping into the market. Keep in mind: An inflow of retail investment usually indicates a top, whether long-term or short-term as retail investors are always the last into the market.
By no means am I calling a top in the market. Just remember that 10,000 was only about 8 weeks ago, which represents a 10% move in a short period.
Other Articles You Might Find Interesting:
- Tags: Market Commentary
March 31st, 2010 — Market Commentary
The market seems to be ready for a big move but in which direction? Will the market continue to grind up slowly, consolidate before moving higher, or pull back giving investors a chance to jump in at a lower price?
The Technical Side
Looking at the chart below, you can see the trend is still intact but momentum seems to be running out. The trend is your friend and you should trade it as so. What do you do when the trend looks like it is about the break or reverse? Buy protection in the form of puts, shorting against long positions, or just go flat (no positions) until you have evidence the trend is still intact and continues to move higher or lower, whichever, the direction.
The 10 DMA on the SPX held today but looks like it might roll over. It looks like sellers want to short this market as the recent volume has been on down days.
Economic Data
Jobs, jobs, jobs. This week’s jobs number may be crucial to market direction. It will be interesting to see how traders will react to the reports. The Census jobs will skew the employment reports. If they come in worse than expected, even with the Census numbers, the market is likely to sell off. Jobs are a lagging indicator but with almost 10% of workers unemployed, it has the power to move markets. The ADP numbers that disappointed traders could give a sign as of what to expect from the payroll and unemployment numbers.
Now, might be a good time to take some profits off the table or to buy some protection.
Other Articles You Might Find Interesting:
- Tags: Market Commentary
March 22nd, 2010 — Market Commentary, Trading
Many individual investors and mutual fund managers choose not to invest or trade stocks selling less than $5/share. Many of these stocks, often referred to as penny stocks, will go to zero but what about the ones that don’t? Many mutual funds place limits on stocks they buy; penny stocks are often forbidden by mutual funds. Once these stocks reach the $5/share mark, mutual fund may jump in and push them higher.
Citigroup (C)
Citigroup is in a turn-around phase and once it pays back the government, this stock has the potential to move much higher. This stock is a longer-term trade or more like an investment, which could see a double in price action over the next few years.
SciClone Pharmaceuticals (SCLN)
SciClone is a Chinese pharmaceutical company that operates mostly in Asia but sells its primary drug ZADAXIN in 30 different countries. SciClone Pharmaceuticals recently had a big upgrade, which has driven up the price. SciClone Pharmaceuticals has many products in testing phase which once completed could drive the stock higher, easily reaching the $5/share mark.
Conexant Systems (CNXT)
Conexant Systems is a semiconductor company that recently reported a less than expected earnings loss. The stock currently has a PEG ratio of 0.33. Conexant closed today at $3.64. Although the trend is down, the stock may find support at around $3.00 as the 200 DMA will support the price. This stock is a trade and not an investment: place stop losses and be prepared to take profits quick.
Xinyuan Real Estate Co (XIN)
Xinyuan Real Estate is a Chinese property management company that also engages in residential real estate development. This stock trades at less 3.86 times forward P/E and at a PEG ratio of 0.14. If you believe in the Chinese real estate bubble, stay away from this stock or take it for a quick trade. The stock is currently selling at a discount to book value and presents a promising trade for a couple points.
Global Ship Lease (GSL)
Global Ship Lease leases container ships to various container-shipping companies with long-term contracts at fixed rates. The company is selling at less than book value with the current price/book ratio of 0.66 and a P/E ratio of 3.22. Global Ship Lease has 17 ships currently on the water with two more coming at the end of 2010.
Trading penny stocks significantly increases your risk. Most of the companies listed are microcap companies that can also increase risk. Please research these stocks before making any purchases. Consider penny stocks speculation and allocate the appropriate funds to them.
DISCLAIMER: I do own shares of SciClone Pharmaceutical.
Other Articles You Might Find Interesting:
- Tags: Investing, Stocks, Trading
March 17th, 2010 — Economy
Is the United States starting a trade war against the Chinese with the Currency Bill? Could the actions taken by the US government force the economy to double-dip rather than to recover? Who wins in this trade war, China or US? Is China really manipulating its currency?
Exports and Imports
China exports a flood of goods to the US and has for many years. The trade deficit has been in China’s favor since at least 1985 according to the US Census and has significantly increased over the years. Both countries need each other but who needs need whom more?
China Is The Largest Holder of Debt
China is the largest holder of US debt account for almost $900 billion in January. Not only are they making the products that the US buys, but they are also financing our government’s day-to-day activities. If China were to pull out of US treasuries and start investing elsewhere (which has begun), how does the US government finance it activities because they can only raise taxes so much on an already suffering consumer?
Who’s Manipulating Currencies?
Some of our elected officials claim that China is manipulating its currency and keeping it undervalued. The Chinese Yuan, which is pegged to the US Dollar, may be undervalued or could the US Dollar overvalued? What is in it for the US if the Yuan is undervalued? Yuan higher, US Dollar lower…China would have more money to buy discounted treasuries?
“It is the single biggest step we can take to promote U.S. job creation, particularly in the manufacturing sector. We plan to move forward with revamped legislation on this issue in the coming days,” said Senator Schumer.
Unless the currency is undervalued to the point that it would revalue the currency at 300 times what it’s currently at, I really don’t see it bringing jobs back to the US but rather inflating the prices on most of the (made in China) products we buy (look around, your probably staring at one now).
If the US government is starting a trade war over currency manipulation then maybe we should rethink some of the roles of the Federal Reserves. Coincidentally, this same organization manipulates the US Dollar through interest rates and the print more button.
Other Articles You Might Find Interesting:
- Tags: Economy
