Market Discussion

[la-onda]

fyi:
Bulls Run Over Downbeat Data
Thursday , May 15, 2008 13:23ET

By Matt Cavallaro

Stocks are posting solid gains despite mostly negative labor and manufacturing data, helped by a downturn in oil prices. Technology has taken the lead, propping up the Dow (+46), S&P 500 (+7), and Nasdaq Composite (+23).

Weekly jobless claims rose by 6K to 371,000, and continuing claims remained above the technically significant 3 million mark for the third straight week. Industrial production fell drastically in April, down 0.7%, over a wide array of goods.

CBS Corp (CBS) will buy CNET for $11.50/share in cash and the WSJ reports Carl Icahn nominated his own slate of directors in a his proxy war with Yahoo (YHOO).

The dollar is displaying strong resistance, rising against the euro despite a raft of weak data this morning. Crude has plunged below $124/bbl following a larger-than-expected build in nat gas inventories. Treasurys are catching a bid with the 10-year yielding 3.867%.

MARKET INTERNALS

    * Top Performing Sectors: Technology (+1.44%), Telecom (+0.87%)
    * Worst Performing Sectors: Energy (-0.34%), Utilities (-0.43%)
    * Stock Gainers: General Motors (GM: +$0.77), UAL Corp (UAUA: +$0.58), Lehman Brothers (LEH: +1.78)
    * Stock Decliners: United Technologies (UTX: -$0.79), Suntech (STP: -$0.62), Countrywide Financial (CFC: -$0.06)
    * Industry Gainers: Consumer Electronics (+3.74%), Forestry (+3.44%), Home Construction (+3.14%)
    * Industry Laggards: Toys (-0.78%), Full Line Insurance (-0.73%), Health Care Providers (-0.73%),
    * Best Etf: B2B Internet HOLDRS (BHH: +6.21%)
    * Advance-Decline: NYSE (1,910:1,093), Nasdaq (1,647:1,119)
    * Volume: NYSE (600 Million Shares), Nasdaq (1.2 Billion Shares)
    * Volatility: CBOE Volatility Index (Midday: $16.80) (Open: $17.66)


TOP STORIES
-- CBS will buy CNET for $1.8B.
-- Weekly jobless claims rise 6K.
-- Crude reverses course following bigger-than-expected build in nat gas stockpiles.
-- Carl Icahn nominates a Microsoft-friendly slate of directors to the Yahoo (YHOO) board, and seeks permission to buy more YHOO shares.
-- GE puts its appliance unit up for sale.
-- John Edwards endorses Obama for the Democratic presidential nominee.


MACROECONOMIC DATA
Thursday
8:30 ET - Jobless Claims, w/e May 10 (Actual: 371) (Expected: 370K) (Prior: 365K)
8:30 ET - Jobless Claims Net Change, w/e May 10 (Actual: +6) (Expected: +5K) (Prior: -18K)
8:30 ET - NY Fed Empire State Survey, May (Actual: -3.2) (Expected: 0) (Prior: 0.63)
9:00 ET - Tsy Intl Capital Flows, March (Actual: +80.4B) (Prior: +60.1B)
9:15 ET - Industrial Production, April (Actual: -0.7%) (Expected: +0.3%) (Prior: -0.4%) (Revised: +0.2%)
9:15 ET - Industrial Production Capacity Utilization, April (Actual: 79.7%) (Expected: 80%) (Prior: 80.5%)
10:00 ET - Philadelphia Fed Manufacturing Index, May (Actual: -15.6) (Expected: -20) (Prior: -24.9)
10:30 ET - Natural Gas Inventories Net Change in billion cubic feet, w/e May 9 (Actual: +93bcf) (Prior: +65bcf)
13:00 ET - NAHB Housing Index, May (Prior: 20)
16:30 ET - Money Supply

Friday
Housing Starts
Reuters/University of Michigan Consumer Sentiment Index


COMMODITIES/BONDS
Crude ($123.09, -$1.13)
Gold ($882.50, +$16.00)
2-Year Treasury Note (2.483%, +3/32)
5-Year Treasury Note (3.157%, +8/32)
10-Year Treasury Note (3.867%, +14/32)

EUROPEAN MARKETS
Bourses in Europe ended mixed after a set of bank earnings killed momentum built elsewhere. Barclays (BCS) said its first quarter net was struck by a GBP1 billion pound write down, but would not seek a capital raise. Expectedly, net fell for the quarter compared to last year, but the announcement that the U.K. bank would not be seeking new funds did surprise the street. Credit Agricole announced a EUR5.9 billion capital raise after reporting net income dropped 66% in the first quarter.

During the first quarter, GDP in Germany grew 1.5%, better-than double the expected rate. The final April CPI report for Germany affirmed the initial -0.2% reading on a monthly basis.

The euro lost early strength vs the dollar following the better-than-expected Philly Fed index.

DAX: (7,081.05, -2.19, -0.03%)
FTSE 100: (6,251.80, +35.80, +0.57%)
CAC 40: (5,057.51, +2.27, +0.04%)
IBEX 35: (14,186.40, -0.80, -0.01%)
Euro/Dollar: (1 Euro = $1.55)

ASIAN MARKETS
China's factory and property spending rose 25.7% in the first four months of 2008 according to a government report. Earlier this week China again lifted the reserve requirement for banks in an effort to cool bank lending. Japan's Nikkei rose to a 4-month high overnight on sharp gains in Sony and NEC Electronics. Asian airlines, Qantas (+6.4%), China Airlines (+6.9%) and Eva Airways (+6.8%) Steel producers were also sharply higher with Nippon Steel enjoying a 7% one day advance.

Nikkei 225: (14,325.95, +207.40, +1.43%)
Shanghai Comp: (3,637.32, -20.11, -0.56%)
Hang Seng: (25,465.24, -68.24, -0.27%)
Dollar/Yen: (1 Dollar = ¥105.12)


SECTOR COMMENTARY
Energy
Germany and China reported strong early 2008 growth, and the dollar is slipping in early trading. The news lifted a broad swath of energy and metals prices. Oil companies (CVX), natural gas (CHK), solar (SOLF), wind (TRN), steel mills (PKX, MT) and a broad group of miners (ACI, BHP, CNX, FCX, RTP) are higher in early trading. Oil is up $2.36 to $126.56.

The EIA reported natural gas inventories rose 93Bcf last week. That was greater than the 85Bcf injection anticipated by analysts at Strategic Energy & Economic Research. At 1.529 trillion cubic feet, nat gas stocks are 3Bcf below the 5-yr average, but new uses for nat gas, like ethanol production, are boosting the demand for the clean burning energy.  The Energy sector (XLE) is up 1.3% to its best level of the day, and near a new high despite the bearish data. Natural gas is down 17c to $11.43/MMBtu.

Land drillers, which are leveraged to natural gas production, are trading near their session highs. Grey Wolf (GW) and  Nabors Industries (NBR) have traded higher since the release of the data.  Nabors is near a new 52-week high.

UBS raised its global oil price forecast to $115 in 2008, $120 in 2009, and $116 in 2010. The firm also upgraded Chevron (CVX) and Plains Exploration (PXP) to Buy from Neutral.

Citigroup issued an upbeat note on the solar energy tax credit bill working its way through Congress.

The AAA reported gasoline prices rose 11.5% over the past month to $3.78.

Alternative Energy: The solar industry, already the hot market segment of the week, is building on recent gains in pre-market trading. Solar Fun (SOLF) shares are adding to their sharp gains this week as investors look forward to earnings on May 21. Wind turbine manufacturer, Trinity Ind (TRN) set a new high on Wednesday.

-- InterOil Corp (IOC) reported Q1 revenues were $192.41M; +51.62% vs yr-ago; BEATING revenue consensus by +4.63%. Q1 EPS was (8c); +55.56% vs yr-ago; BEATING earnings consensus by +72.41%.


Materials
The Materials sector may bounce back this morning. Steel industry names were sharply higher in Asian trading. This morning higher prices for copper, gold and silver bode well for miners.

-- Lundin Mining Corp (LMC) reported Q1 revenues were $305.73M; +57.66% vs yr-ago; MISSING revenue consensus by -7.03%. Q1 EPS was 20c; +11.11% vs yr-ago; MISSING earnings consensus by -9.09%.


Industrials
Macro manufacturing and production reports this morning disappointed, erasing modest momentum on Wall Street before the bell. The industrial production reading for April was -0.7, well below forecasts of -0.3. Capacity utilization lagged as well at 79.7%, down from 80.5% in April. Motor vehicles and parts were by far the weakest segment, down 8.2%, while utilities climbed 0.3%. The May NY Empire State Manufacturing Index fell to a -3.2 reading, down from 0.6 in April. This was expected to be unchanged. Prices paid and number of employees rose, while new orders and shipments lost ground. The data pared early strength in the industrial sector (XLI: -0.1%), now trading flat.

General Electric (GE) is making plans to sell off its appliance businesses, worth $5 to $8 billion.

-- Acxiom Corporation (ACXM) reported Q4 revenues were $349.80M; -1.85% vs yr-ago; BEATING revenue consensus by +0.32%. Q4 EPS was (76c). Adjusted Q4 EPS was 15c; -25.00% vs yr-ago; MISSING earnings consensus by -6.25%.

-- Teekay Shipping Corporation (TK) reported Q1 revenues were $567.67M; +23.55% vs yr-ago; MISSING revenue consensus by -1.98%. Q1 EPS was 21c. Adjusted Q1 EPS was 83c; -25.89% vs yr-ago; MISSING earnings consensus by -11.70%.

-- UBS cut Knight Transportation (KNX) to neutral from buy.

-- Gatx Corporation (GMT) was upped to outperform by market perform by Morgan Keegan.

-- SunTrust initiated Lennox Int'l (LII) at neutral.


Consumer Discretionary
After a rough day for fast food on Wednesday, Steak N Shake (SNS) reported it lost (10c) in Q2, below the year ago 21c profit and the 2c consensus estimate. Sales for the quarter were impacted by ongoing deterioration in the consumer economic environment and increased promotional activity throughout the restaurant sector. Shares of JBX (-10%), RRGB (-5%), MCD, BKC, CKR & RRGB lost ground yesterday.

Department stores remain in the earnings spotlight today. Urban Outfitters (URBN) beat the street by 2c, reporting 25c vs. 17c in Q1, with a 10% increase in same store sales. This morning JC Penney (JCP) reported Q1 EPS 54c vs $1.04 Beats 50c Est on an in-line 5% sales decline. After the close, Nordstrom (JWN) and  Kohls (KSS) report.

-- J.C. Penney Company Inc (JCP) reported Q1 revenues were $4,127.00M; -5.13% vs yr-ago; BEATING revenue consensus by +0.44%. Q1 EPS was 54c; -48.08% vs yr-ago; BEATING earnings consensus by +8.00%.

-- Urban Outfitters Inc (URBN) reported Q1 revenues were $394.29M; +25.35% vs yr-ago; BEATING revenue consensus by +0.66%. Q1 EPS was 25c; +47.06% vs yr-ago; BEATING earnings consensus by +8.70%.

-- Melco PBL Entertainment (Macau) Ltd (MPEL) reported Q1 revenues were $482.87M; +2,279.84% vs yr-ago; MISSING revenue consensus by -10.21%. Q1 EPS was 3c. Adjusted Q1 EPS was 10c; +242.86% vs yr-ago; BEATING earnings consensus by +11.11%.

-- Arctic Cat Inc. (ACAT) reported Q4 EPS 2c vs (8c) Beats (4c) and warned on Q1 EPS, but guided higher for full year sales and earnings.


Consumer Staples
-- Spartan Stores, Incorporated (SPTN) reported Q4 revenues were $570.73M; +9.74% vs yr-ago; MISSING revenue consensus by -3.56%. Q4 EPS was 37c. Adjusted Q4 EPS was 36c; +12.50% vs yr-ago; BEATING earnings consensus by +12.50%.

-- Lifeway Foods, Inc. (LWAY) reported Q1 revenues were $11.12M; +23.28% vs yr-ago; BEATING revenue consensus by +0.18%. Q1 EPS was 5c; -28.57% vs yr-ago; BEATING earnings consensus by +66.67%.


Health Care
-- Prestige Brands Holdings, Inc. (PBH) reported Q4 revenues were $80.43M; +3.06% vs yr-ago; MISSING revenue consensus by -0.06%. Q4 EPS was 21c; +23.53% vs yr-ago; BEATING earnings consensus by +10.53%.

-- Caris set Wyeth (WYE) at above average and Elan Corp (ELN) at sell.

-- Syneron Medical Ordinary Shares (ELOS) was upped to buy from neutral at Merriman Curhan Ford.


Financials
Foreigners bought a net total of $80.4 billion in U.S. securities in March, compared with $64.9 billion during February. Treasurys accounted for $55 billion, agency bonds made up $18.2 billion, stocks totaled $11.4 billion, while corporates were net sold to the tune of -$4.5 billion. Long-dated interest rates slid this morning with the 10-year yielding 3.90%.

The Fed reports outstanding weekly Commercial Paper fell by $19.7 billion and Asset Backed Commercial Paper declined $11.2 billion, both representing two-year lows.

On the earnings front, Blackstone Group (BX) swung to Q1 loss of $251 million, or 97 cents per share, compared with net income of $1.13 billion a year earlier. Ex-items, BX reported an eps loss of 7c; a Thomson Reuters estimate called for earnings of 13c. Shares are down 1 1/2%.

In Europe, bank earnings sliced into broad-market strength. Barclays (BCS) said its first quarter net was struck by a GBP1 billion pound writedown, but will not immediately seek to raise new capital. Expectedly, net fell for the quarter compared to last year, but the U.K. bank's announcement that it would not pursue a capital raise did surprise the street. Meanwhile, Credit Agricole announced a EUR5.9 billion capital raising after reporting net income dropped 66% in the first quarter.

Freddie Mac (FRE) and Fannie Mae (FNM) are weaker this morning as the market awaits a housing bill near completion that will overhaul regulation for the mortgage finance industry.


Information Technology
CBS Corp (CBS) is in an agreement to buy CNET for $11.50/share in cash; a 44.6% premium to the Wednesday close, and a 52.3% increase since Knobias reported CNET was a takeover target in its May 5 story on Internet Speculation (Internet Speculation Drives Active Pre-Market Trading)

-- SINA Corp (SINA) reported Q1 Adj EPS 33c vs 27c Beats 26c Est; Guidance In-Line.

-- Ctrip.com (CTRP) reported Q1 EPS 20c vs 22c Misses 23c Est; Guidance Below Consensus.

-- Brocade Comm (BRCD) topped earnings and sales expectations.


Telecommunication Services
Verizon (VZ) won a $678.5 million 2-year network equipment and services contract from the U.S. Department of Homeland Security. AT&T Inc. (T) was named as the secondary provider for the department.

-- Cellcom Israel Ltd (CEL) upped to buy from hold at Jefferies.

-- China Netcom Group Corporation Limited Hong Kong (CN) cut to sell from hold by Deutsche Bank.


Utilities
The EU commission told Spain to drop specified conditions for the 42.5 billion euro bid for Endesa. French utility Poweo recorded a 72% increase in Q1 sales.

[Ramsburg]

Here some quick technical notes for the SPX:

- From October to March, a solid bear trend was in place, with several down-swings of bigger intensity and heavy volume for the extended selling zones. The last down-swing, ended in March, creating a false downside breakout.

-  After the false breakout (March), the index is developing a steady up-swing (still in play), that ended the previous pattern with an upside breakout and new relative higher highs. During the process an Inverted H&S was designed and triggered (a pattern that is still in play). This kind of price action (after a false breakout), suggests a big Baskerville signal in place (compatible with the Inverted H&S target near 1500).

- Moving average analysis: the EMA-50 is still below the EMA-200, still marking the presence of the down trend, but the EMA-50 has already a positive leaning while the EMA-200 is flat. These are lagging indicators, but its current layout suggests an upside inversion taking place for the mid-term (not yet confirmed).

-Short term analysis: the index reversed today at 1440, creating a new resistance level for short term. Momentum analysis may suggest a consolidation to take place before a new advance, but the up swing is still intact at this point. On the downside, I would point 1406 (aprox the EMA-200) and 1388 which has been a reaction zone, both values to take in consideration in a probable consolidation scenario.

My overall sentiment for the SPX is bullish right now despite from a possible short term consolidation or selling action.

In attach 2 annotated charts.

Best regards,

[la-onda]

Old Fool Notes – 05/21/08

We had an ugly day today.  The blame, according to the pundits goes to oil prices and the Fed minutes.  They may have pushed us over the edge but good ol' fashioned profit taking was the final driver.  The volume today was 2.2 billion with a ratio of 5.1 to 1.  That's a huge ratio on moderate volume.  In my opinion, what that means is that the buyers were on strike and that the big boys were not playing.  If the big boys were running for the exits, the volume would have been 2.8 billion. The bears have done a good job over the past 4 days so I gave them the daily chart channel.  They have a good head of steam going but need to take 2400 to really seal the deal.  We will see.

The hourly charts look horrible but are in rebound mode.  As you can readily see, 2440 is the key here.  Then we are looking at 2410.

The ratio chart is dropping like a rock and is now in reversal territory.  No sell sign evident yet – but remember – the signal is very slow here.

The weekly chart is hurting but has also not flashed a sell signal.  2409 is the key on this chart.

The Wilshire dropped like a rock and carved through the 14-day like it wasn't even there.  It under corrected relative to the NAZ and that's good.  I( really do not want to see another down day here.

The P&F looks ugly.  Interestingly, the critical level on this chart is 2430.  Ugly, but neutral.

I had one trade today in the TP and I posted it.  Unfortunately, we had clients come in unexpectedly right before lunch so I was tied up for the afternoon (and evening).  I lost a few bucks on the trade but the stop saved me from a complete disaster.  I like to think that I would have gone to QID at 2475 if I had been in front of the computer – but who knows.  The key levels tonight are 2480 up top and 2440 and 2410 on the downside.  I will be looking at the futures in the morning to decide a trading strategy for tomorrow.

Charts link below,

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2071209

Have a good evening,

The Old Fool

[pinoleropuro]

caution out there!
it looks like the worse is not ye here.
Lehman Brothers, Citigroup and Fannie Mae are going to kill the market!
take a look at their charts. it is scary!

[Ramsburg]

Quick Update:

SPX started a consolidation as suggested by momentum analysis, selling off to the exact 1388 breakout point mentioned on the previous update (1388 was the intraday low for Wednesday session).
This drop didn't change the overall pattern yet, so the Up Swing is still in Play and we may look at it as normal consolidation process after a breakout.

It is important that the SPX holds above its EMA-50 or in a worst case scenario above 1370. Otherwise the current Up Swing may be compromised.

Here's an updated chart:

Regards,

[pinoleropuro]

hola!
on a positive view some would argue that we are going to see strong move to the upside now that the down trend has been broken on the SP500.
Thursday the trend was broken, Friday it continued and we closed higher and we're not overbought yet.
this could bring Parabolic wave 3 action. take a look at the chart.
any thoughts?

looks like we are still in that up trend channel with the parabolic wave action still intact.

[la-onda]

Shadowtrader update:
http://www.shadowtrader.net/videos/monday052608st.html

cheers
O.

[la-onda]

 Housing Data Washes Out Oil, Stocks Rally
Tuesday , May 27, 2008 16:24ET

By Matt Cavallaro
[email protected]

A stark reversal in the crude trade, triggered by poor housing and sentiment data, spurred Tuesday's cyclical rally. Technology and the consumer sector sparked gains for the Dow (+68.72), S&P 500 (+9.42), and Nasdaq Composite (+36.57), while energy and materials were market laggards.

New home sales climbed 3.3% in April, missing expectations due to a downwardly revised rate for the prior month. Consumer confidence fell for the fifth straight month, hitting a 16-year low according to the Conference Board.

Oil dipped below $129/bbl on speculative demand-drawdown following the downbeat housing and sentiment reports this morning. Weak data out of Germany boosted the dollar against the euro, sending precious metal futures lower. Long-dated Treasury yields were on the uptick with the 10-year approaching 4%.

MARKET INTERNALS

    * Top Performing Sectors: Technology (+1.67%), Health Care (+1.02%)
    * Worst Performing Sectors: Materials (-0.48%), Energy (-0.48%)
    * Stock Gainers: Citigroup (C: +$0.54), AMR Corp (AMR: +$0.52), Apple (AAPL: +$5.11)
    * Stock Decliners: General Motors (GM: -$0.18), Sprint (S: -$0.24), UBS (UBS: -$1.56)
    * Industry Gainers: Airlines (+5.24%), Recreational Products (+2.44%), Delivery Services (+2.51%)
    * Industry Laggards: Platinum & Precious Metal (-3.28%), Mortgage Finance (-2.79%), Gold Mining (-2.43%),
    * Best Etf: B2B Internet HOLDRS (BHH: +5.77%)
    * Advance-Decline: NYSE (1,984:1,144), Nasdaq (1,893:979)
    * Volume: NYSE (1.12 Billion Shares), Nasdaq (1.72 Billion Shares)
    * Volatility: CBOE Volatility Index (Close: $19.63) (Open: $19.55)


TOP STORIES
-- Front-month crude oil contract slips below $129/bbl.
-- New home sales climb 3.3%, falling short of street estimates.
-- Citi cut General Motors (GM) to hold from buy and recommends swapping out of GM and into American Axle (AXL) which was upgraded to buy from hold.
-- Alan Greenspan told the FT, "There is a greater than 50% probability of recession."
-- Idaho hosts primary elections.


MACROECONOMIC DATA
Tuesday
9:00 ET - Case-Shiller Home Price Index, March (Actual: -14%) (Prior: -13.6%)
10:00 ET - Richmond Fed Mfg Index, May (Actual: -3) (Expected: 0) (Prior: 0)
10:00 ET - Conference Board Consumer Sentiment, May (Actual: 57.2) (Expected: 60) (Prior: 62.3) (Revised: 62.
10:00 ET - New Home Sales, April (Actual: 526K) (Expected: 533K) (Prior: 526K) (Revised: 509K)
10:00 ET - New Home Sales Percent Change, April (Actual: +3.3%) (Expected: +1.3%) (Prior: -8.5%)
10:30 ET - Dallas Fed Manufacturing Production Index (Actual: 5.5) (Prior: 12.5)
12:00 ET - Chicago Fed Midwest Mfg Index (Actual -1.7%) (Prior: -0.7%)

Wednesday
MBA Purchase Applications
ICSC-UBS Store Sales
Durable Goods Orders
Redbook Retail Sales Index
U.S. Department of Energy Inventories


COMMODITIES/BONDS
Crude ($128.40, -$3.79)
Gold ($907.90, -$17.90)
2-Year Treasury Note (2.514%, -4/32)
5-Year Treasury Note (3.227%, -11/32)
10-Year Treasury Note (3.921%, -18/32)


EUROPEAN MARKETS
Early on, miners provided the primary power in Europe, as BHP Billiton (BHP), Rio Tinto (RTP) and Anglo American posted gains of over 1% despite dollar strength biting into precious metals futures. But Europe failed to cling to early gains despite an easing in the crude trade. Vodafone Group beat estimates, swinging to a gain of $13.4 billion. Infineon Technologies got an early boost on word Max Dietrich Kley will replace outgoing CEO Wolfgang Ziebart in July.

GDP in Germany during the first quarter was unchanged at 1.5% on a quarterly basis. Consumer confidence fell 0.7 to 4.9, much lower than the 5.7 forecast.

DAX: (6,958.66, +4.82, +0.07%)
FTSE 100: (6,058.50, -28.80, -0.48%)
CAC 40: (4,906.56, -31.28, -0.64%)
IBEX 35: (13,451.40, -132.30, -0.99%)
Euro/Dollar: (1 Euro = $1.57)

ASIAN MARKETS
The Nikei 225 bounced back overnight from a notable decline in Monday trading. Dow Jones suggested short covering played a roll in the low volume rebound. Following upgrades, the paper industry led the rebound with Nippon Paper (+2.5%), Oji Paper (+3.1$) and Misubishi Paper (+9.1%) up notably. Exporters in Asia have tumbled since the National Association of Realtors released its report on May 23. Auto and tire makers were laggards in Tokyo trading at the start of the week. After big declines on Monday, automakers bounced back in a Tuesday bounce as the dollar firmed against the yen. Mazda closed up 4.8% and Isuzu rose 3.8%.

China's CSI 300 rose modestly on Tuesday, after dropping to a 1-month low on Monday. The CSI 300 has lost one-third of its value year to date due to slowing earnings growth and record oil prices. China's plan to introduce competition into its mobile communications industry produced sent shares of dominant China Mobile tumbling 8.2% on Monday.  China Mobile will face new wireless competition as China Telecom will add mobile services purchased from China Unicom. China Unicom will in turn merge into China Netcom Group to make the third mobile carrier in China. Shares of China Telecom, Netcom and Unicom were not traded on Monday. Three firms will offer mobile services under the new scheme. The reorg is expected to spur capital spending according to a Citigroup report, with ZTE Corp a key beneficiary. On Monday ZTE shares rose 1.1%.

Nikkei 225: (13,918.93, +228.74, +1.62%)
Shanghai Comp: (3,375.41, +10.86, +0.32%)
Hang Seng: (24,345.40, +218.09, +0.89%)
Dollar/Yen: (1 Dollar = ¥103.80)


SECTOR COMMENTARY
Energy (-0.48%)
AAA reported on Friday that the national average gasoline price hit a new record of $3.875/gallon. The Federal Highway Administration reports U.S. drivers drove 4.3% less in March compared to the same month last year. Despite cessation of floor-trading in New York yesterday in observance of Memorial Day, the front-month crude contract climbed over $133/bbl on militant activity by the Movement for the Emancipation of the Niger Delta.

Another rebel attack on a Nigerian pipeline, this one owned by Royal Dutch Shell (RDS/A), was an early catalyst for crude pushing towards $133/bbl, but downbeat housing and consumer confidence data has curbed speculation for strong worldwide demand despite soaring prices. One reason for resilient demand is government price controls in many Asian countries. Sinopec (SNP) loses $430 on each metric ton of oil products it refines due to China's price controls. Subsidies from the Chinese government cover only half the shortfall according to a Bloomberg News report. SNP reported $1 billion in government subsidy payments for April.

Dow Jones reports BP and Exxon (XOM) have finally submitted proposals to the Iraqi Oil Ministry on technical services contracts to boost production at Iraq's oil fields.
+ Baker Hughes (BHI) was upped to Buy from Neutral at Merrill Lynch.

E&P names may reverse their recent weakness with natural gas futures up 1.5% in early trading.
+ Newfield Exploration (NFX) was upped to Buy from Hold at KeyBanc.
+ NGAS Resources (NGAS) was upgraded to Outperform from Market Perform by BMO Capital based on the company's horizontal drilling program.

Insider Buying:
+ SandRidge Energy (SD) director bought 460K SD shares last weekpaying as much as $50/share. Buying on strength - shares traded for just $30 four months ago.

Materials (-0.48%)
The dollar is strengthening versus the yen and euro this morning. Gold and silver are lower in early trading. Graham Summers, writing for Seeking Alpha on May 23, noted current U.S. inflation is running at 4.0%, but based on the pre-1998 computation method it would be 7.3% and based on the pre-1983 method it would be 11.6%.
- IAMGOLD (IAG) was cut to Neutral from Buy at Merrill.

K&S AG, Europe's largest potash producer, plunged as much as 8% in Germany on
Monday. Soybean prices are higher on speculation that China will cut tariffs on soybean imports. Corn and wheat prices are also up ahead of today's weekly USDA crop plantings report.

Chemicals:  Blackstone Group LP and Apollo Management LP are in talks to acquire specialty-chemicals company Chemtura Corp (CEM) according to a Dow Jones report.
Calument Specialty Products (CLMT) CEO, CFO and beneficial owners have purchased more than 322K shares this month.

Industrials (+0.66%)
Industrials traded in the middle of the pack on Tuesday. Marine transports (KEX, ACLI) and heavy construction (SGR, FWLT, JEC) are under pressure following crude's reversal below $130/bbl. Regarding year-to-date outperformers within the industrial sector, trucking is up over 16%, rails have risen just under 30%, and transports have climbed nearly 29%.

Several regional Fed banks delivered disappointing productivity reports this morning as manufacturing activity continues to slip amidst the U.S. slowdown. The Chicago Fed's manufacturing index dropped 1.7% to a seasonally adjusted level of 105.7, mostly due to a sharp decline in auto productivity.

Manufacturing activity retreated during May in the Richmond area, according to the Federal Reserve of Richmond's manufacturing index. The headline reading declined to -3 from 0 in April, while the component shipment index fell to -1 from 6.

The Dallas Fed reported its current production index dipped to 5.5 in May from 12.5 in April. Prices paid for raw materials was red hot at 67.3.

Tomorrow, the Department of Commerce reports durable goods orders for the month of April.

General Electric's (GE) plans to sell its appliance unit has sparked the interest of South Korea's LG Electronics. Chief Executive Yong Nam briefly quipped, "We are closely watching developments."

-- AGCO Corporation (AG) upgraded to outperform from neutral by Credit Suisse First Boston.

-- Knight Transportation Inc (KNX) upped to outperform from market perform at Wachovia.

-- Grupo Aeropuerto Pacific ADR (PAC) upgraded to buy from hold at Grupo Aeropuerto Pacific ADR.

Consumer Discretionary (+0.76%)
The Consumer Discretionary sector, Retail, and Homebuilding indices jumped higher with the release of new home sales and consumer confidence data at 10am ET.  Thanks to a downward revision of March data, April new home sales surprised the market, rising an unexpected 3.3% to a 526K seasonally adjusted annual rate. Year over year new home sales are down 42.0%.  However, a higher median sales prices and a drop in the months supply of homes on the market were positives for the homebuilding industry.

-- The year over year decline in new home sales is the biggest drop since Sept 1981.

-- Inventory declined to a 10.6 month supply from 11.1 months in March.

-- Median new home prices rose 9.1% to $246,100.

-- The Conference Board reported consumer confidence tumbled in April to 57.2 from 62.8 in March.

Last week's jump the supply of homes for sale to 4.55 million, a record 11.2 months of supply, may have been a tipping point for market psychology.

Crude oil prices staged a rapid reversal this morning from above $133/bbl to below $130.  The Fort Worth Star-Telegram reported American (AMR), Delta (DAL), Northwest (NWA), Continental (CAL) and US Airways (LCC) matched United's (UAUA) $10 - $ 60 round trip fare hike by Saturday.  This marks the 12th successful fare increase in 16 attempts this year according to the story.

A "few thousand" city pairs with competition from JetBlue (JBLU) or Southwest (LUV) saw round trip fare declines of $30 at American and Continental.

-/+ Citigroup cut General Motors (GM) to Hold from Buy and recommends investors swap out of GM and into American Axle (AXL) which was upgraded to Buy from Hold. Last week GM announced the nearly 3-month walkout at AXL cost it a pre-tax charge of $1.8 billion in Q2. GM shares hit a 15-year low on Friday.
- Borg Warner (BWA) was cut to Hold from Buy at KeyBanc.
+ Darden Restaurants (DRI) was upped to Buy from Hold at Citigroup.
+ Chipotle Mexican Grill (CMG) was initiated with an Overweight rating at JP Morgan.
- QuikSilver (ZQK) was cut to Neutral from Buy at B. Riley, $10 target.

Insider Buying:
+ A Steak n Shake (SNS) director and an investment fund scooped up a total of 106K SNS shares of the fast food restauant chain at below book value prices last week.

Staples (+0.56%)
Anheuser-Busch (BUD) volumed surged 11 times its daily average volume last Friday on rumors Inbev is putting together financing for a takeover bid. Barron's suggests it would be difficult for Inbev to win a hostile bid. The Financial Times points to a possible merger with SABMiller if the Anheuser plans fall through. Deutsche Bank cut BUD to hold from buy, setting a target price of $56.00, citing the recent rally following Inbev's takeover speculation. Deutsche Bank believes the offer would require aggressive cost reduction which would potentially harm the brands. BUD shares are currently trading near $56.87.

BUD and fellow brewers are grappling with rising grain costs. On Friday, the Department of Agriculture reports unadjusted crop prices and livestock & product prices received by farmers during May. This could give the market an inside look into future CPI and PPI data. On Tuesday, wheat futures climbed nearly 1% while corn futures shed almost 1/2%.

-- Anheuser-Busch Companies Inc (BUD) cut to hold from buy at Deutsche Bank.

-- Coca Cola Hellenic Bottling Co SA ADS (CCH) upped to overweight from neutral at HSBC Holdings.

Health Care (+1.02%)
Health care stocks firmed Tuesday despite sour trading in blue chips Pfizer (PFE) and Merck (MRK).
ZymoGenetics (ZGEN) announced the FDA approved a Prior Approval Supplement application for a 20,000 international unit (IU) vial of RECOTHROM(TM) Thrombin, topical (Recombinant) and also approved co-packaging of the 20,000-IU vial with the ZymoGenetics Spray Applicator Kit.
Santarus, Inc. (SNTS) has achieved a $2.5 million regulatory milestone under its over-the-counter license agreement with Schering-Plough Healthcare Products, Inc. Santarus expects to receive the $2.5 million payment within the next two weeks. Schering-Plough is seeking FDA approval to sell a ZEGERID(R) branded omeprazole/sodium bicarbonate OTC product.
Year-to-date, biotech is vastly outperforming the broad market, up 2%. Health care providers are the sector laggard, dipping more than 24%.

-- GlaxoSmithKline PLC (GSK) cut to underweight from equal-weight by Morgan Stanley.

-- LCA-Vision (LCAV) upped to sector perform from underperform by RBC.

-- WellPoint (WLP) upped to outperform from market perform at BMO.

Financials (+0.37%)
In keeping with the recent negative correlation, financials bounded up while petroleum prices turned lower on the downbeat housing data this morning.

The Case Shiller 20 City Composite Home Price Index for March fell 14.4% to 172.16 from 201.01 a year ago.  The Q1 decline was 14.1% Y/Y. Both declines were records for the index.  David M. Blitzer, Chairman of the Index committee at Standard & Poor's said, "There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path, with 19 of the 20 metro areas reporting annual declines, and six of those now at negative rates exceeding -20%."

Shares of UBS (UBS) were crushed on word the Swiss bank will be hit with more mortgage related losses. UBS market value is down 43% this year alone to a market value of $59.9 billion, according to Bloomberg. Year-to-date, full line insurance has plunged 33%, mortgage finance is down almost 30%, and investment services have dipped more than 26%.

HSBC Holdings (HBC) Chief Michael Geoghegan told shareholders that losses related to subprime mortgages may extend into the near term despite a dramatic decrease in exposure. The bank now has $3.2 billion in provisions compared to $4.6 billion at the end of the fourth quarter.

The WSJ reports traders were active buyers of put options for Lehman Brothers (LEH) last week.

Information Technology (+1.55%)
The tech-heavy Nasdaq Composite picked up steam Tuesday, rising nearly 1 1/2% as cyclical sentiment perked up on lower crude prices.
Lehman sees prices for DRAM and NAND chips firming. Lehman upped their price target for Equal Weight-rated Micron Tech (MU) to $9 from $8. The CEO of European chipmaker Infineon (IFX -5% pre-mkt) resigned citing strategy differences. The CEO of ST Micro (STM -1% pre-mkt) said buying Infineon's wireless division wouldn't make sense (DJ).  STM expects to grow revenue faster than the market in 2008. Jefferies is seeing minor bugs in Intel's Montevina Notebook chipsets, but retains its Buy rating on Intel (INTC).

+ Oppenheimer says Sierra Wireless is seeing strong demand from AT&T (T) and Sprint (S).
+ Lam Research (LRCX) was upped to Buy from Neutral at Merrill Lynch.
+ Quest Software (QSFT) should see margin gains according to Cowen.
+ Ascent Solar (ASTI) was initiated at Outperform at Cowen.
- Marvel Tech (MRVL) was cut to Neutral from Buy at Goldman Sachs on valuation.
- ATA Inc (ATAI) was cut to Sell from Buy at Merrill.

Insider Buying:
+ Avanex (AVNX) director bought 50K AVNX shares at $1.03 on May 21, following a
321.5K share purchase on May 8-9.
+ Logitech (LOGI) director bought 45K LOGI shares last week.

Telecom Services (+0.65%)
Telco's rebounded from early weakness, riding a cyclical and tech wave higher.
Vodafone (VOD) reported a GBP10.1 billion fiscal year adjusted profit (better than expected) and guided to GBP11.0B to GBP11.5B for this year. Vodafone CEO Arun Sarin is stepping down in July and will be succeeded by his deputy, Vittorio Colao. South African mobile phone company MTN Group is holding merger talks with India's Reliance Comm Ltd.

- Goldman Sachs cut China Mobile (CHL) to Sell on Monday.
- Rogers Comm (RCI) was cut to Buy from Action List Buy at TD Newcrest due to increased competition; target $55.
- Telus (TU) was cut to Hold from Buy at TD Newcrest.
+ BCE was upped to Neutral from Sell at UBS.
+ Citizens Comm (CZN) and Consolidated Comm (CNSL) were upped to Outperform from Neutral at Credit Suisse. CS considers both names attractive takeover candidates with attractive free cash flow yields.

Utilities (+0.61%)
Utilities post solid gains, but lagged the broad-market advance as the energy trade turned lower.
Babcock & Brown Power (BBCBF) dropped 20% for the second straight session on Friday following its AUD3.1 billion capital raise amid questions about its capital requirements. Gaz de France posted a healthy session as the company plans merger talks with Suez. Trading in Distrigas was halted with Suez in talks to sell to Eni.

-- EnergySouth (ENSI) upped to buy from hold at Brean Murray.

[babouk]

Hello subscribers,
I'd like to ask you to explain me and give me advice about this service and my decision about further subscription. When I look at the performance of MAIN I see horrible money management and bad technical entries and exits. SP is about 6 % down and MAIN about 27 %. I don't see any market edge in this service now. Furthermore David sometimes violates his own money management rules like in case of IMMR. What I have learned? Do not trust advisers, they care only about your money. Where is David? 

Sorry for bothering,

[AussieTrader]

Hello subscribers,
I'd like to ask you to explain me and give me advice about this service and my decision about further subscription. When I look at the performance of MAIN I see horrible money management and bad technical entries and exits. SP is about 6 % down and MAIN about 27 %. I don't see any market edge in this service now. Furthermore David sometimes violates his own money management rules like in case of IMMR. What I have learned? Do not trust advisers, they care only about your money. Where is David? 

Sorry for bothering,

Hi Babouk,

I know you have been around the 3Stocks community a while and of course you should always question when you are looking at value for money.  You know when the main portfolio went on the long term strategy it was done with the best of intentions and integrity. Long term investing is a very profitable approach, but long term means years not months before you see the benefits of actions. Also a consequence of long term investing is that you encounter deeper and longer periods of drawdown (because it is usual to tarde this approach with very wide or no stops in place). It is true to say 3 stocks did not fully comprehend the impact of these issues when the long term approach came in.
I hope you have read the Strategy document we sent out last week or so, this detailed our future focus and acknowledged the problems long term investing encountered with members.
My main focus IS money management, if you stay around with us you will see that in our new porrtfolio structure and education material we are putting together. Indeed you will already see the Main port with stops in place.
David will no longer be managing the ports or trading strategies, that will be Ramsburg and I. And for sure our aim IS to provide subscribers with a trading edge.
I hope you stay around to see the impact of the new strategy

[berloga]

Hi Aussie and the others,

  I guess, this is a very critical point for the 3SOF service. I've been a paying member since 2005 and so far it's been a motivation for me. There have been 2 other occasions when David would disappear out of sudden, like last year, when EliteG took over with the "fire" trading strategy. I believe what subscribers would like to hear is a frank answer as to why David stepped down, aside from having the stress, and more importantly, why he cannot be part of your team and share the responsibilities.

  Is it a clash of the trading views, or the ownership of the service, or something else that prevents his participation? The situation can be compared with the one when people board a Boeing plane and hear an announcement that the main engine has been replaced by a Chinese Xing-xing-bling motor for the flight!! I believe passengers would be due an explanation of the reason, wouldn't they!?

  I personally like the outlined strategy and hope the site will revive itself. It's been dead for quite a bit now, only la-onda still running around his posts. I've seen the stops and welcome the protectionism of the capital.

  What I'd personally be interested in seeing is what the timeline is for beginning the work under the new strategy.

  Good luck to Ramsburg and Aussie!

[AussieTrader]

Hi Aussie and the others,

  I guess, this is a very critical point for the 3SOF service. I've been a paying member since 2005 and so far it's been a motivation for me. There have been 2 other occasions when David would disappear out of sudden, like last year, when EliteG took over with the "fire" trading strategy. I believe what subscribers would like to hear is a frank answer as to why David stepped down, aside from having the stress, and more importantly, why he cannot be part of your team and share the responsibilities.

  Is it a clash of the trading views, or the ownership of the service, or something else that prevents his participation?

Hey Berloga, I too have been subscriber since 2005. You know having seen it before and heard David mention it in some of his posts that he is quite a volatile person, it is just his nature. Ramsburg and he are best friends and have worked together on many projects in the past. The simple truth is David has had enough of 'running' the 3Stocks portfolio's. He does not want an active participation. He felt personal hurt and agonised when his trading strategies resulted in people losing both money and faith in him, that was a big stress for him to deal with.

The situation can be compared with the one when people board a Boeing plane and hear an announcement that the main engine has been replaced by a Chinese Xing-xing-bling motor for the flight!! I believe passengers would be due an explanation of the reason, wouldn't they!?

OK, now I take exception to be described as a Chinese Xing-xing-bling motor LOL. As I am sure Ramsburg would too. To continue your analogy of the airplane, Boeings can fly on 1 engine and they have more than 1 pilot in the cockpit (which is a better analogy to what is happenng with 3SoF). Now, I can tell you a related story. A few weeks back I had to change tyres on my car, I took it to the tyre place and asked just to put on the economy tyres (it was just a run around car). When i got back, paid and looked at the wheels, I saw the brand name was Ling - Long and I thought to myself Jeez I hope these Chinese Xing-xing-bling tyres will work out OK!!! Which indeed they did

  I personally like the outlined strategy and hope the site will revive itself. It's been dead for quite a bit now, only la-onda still running around his posts. I've seen the stops and welcome the protectionism of the capital.

  What I'd personally be interested in seeing is what the timeline is for beginning the work under the new strategy.

  Good luck to Ramsburg and Aussie!

La-onda and other members like him are what make 3SoF a great community. You will see more outward communication from us regarding implementation of the strategies and other plans we have in the pipe very soon indeed. Our first task was to bring the main portfolio into line with the Diversified portfolio goals in a professional and structured way.

Thanks for your input Berloga

[la-onda]

fyi:

Old Fool Notes – 06/07/08
Friday was a very nasty day.  Every hour of the day was down except for one – and that one ended flat.  As has been widely announced it was a combination of a bad jobs report and a huge spike in oil prices that did the damage.  Now the key is do we spill out the bottom big time.  The signals are not terrible despite a really ugly day.  But who knows what the pros are thinking.  And for those that are inclined to argue, Friday proved that news trumps technical analysis.  The volume was 2.2 billion with a ratio of 8.9 to 1 in favor of the bears.  Yep 9 to 1.  It was as high as 15 to 1 during the day and running at a 1.9 billion rate.  This brings us to two conclusions – The buyers were on total strike for most of the day and they finally did some buying late (around 3:00 and again at 3:30).  Pull up a 3-minute chart and you can see the buying spurts.  So there was some selective buying but it was very infrequent.  We will see what happens next week.

The daily chart did not get hit as bad as the day felt.  Note that we only gave back two days of gains.  The 39/1 stoc is still high and the OBV has not crossed over.  This chart still looks OK.  Now, if Monday gets ugly, all bets are off.

On the other hand the hourly charts look about as ugly as it gets.  We took out four support levels without even slowing down.  I missed it and do not have it marked but the 2470 level has decent support. We have bottomed there twice earlier this month and again in late May.  Keep an eye on that level.

The ratio chart has had a tough week but is still not flashing a sell.  We need some sustained push by the bulls to keep this one in good shape.

The weekly chart still looks OK.  You will note that we have been tracking sideways for the past month.  Essentially, the indicators say the bulls are still in control while the sideways move suggests that neither bull nor bear is in charge.

The Wilshire took about the same hit as the Naz on a percentage basis but was more fragile going into Friday.  Consequently, the chart has a couple of indicators that look weak.  This is an ominous chart.

On the flip side, the P&F chart did not trigger a new signal despite the hard down day.  The P&F chart looks a lot like the weekly, showing a long period of sideways movement.

I was much too busy on Friday to do any trading in the TP.  In retrospect, I could have jumped on QID and just ignored it.  I did pick up a few mutual funds for the LT port.  Monday should be interesting and presents a possible study on support/resistance areas.  It also offers a study on the effect of oil prices.  There is reasonably strong support at 2470 and 2445.  Of course, all of our previous support areas have now turned into resistance.  The strength of the bears in shoving below 2470 and holding it will be pivotal.  Then the oil price comes into play.  If it doesn't break a bit, the bears will have the leverage.  The big bulls have shown that they are not willing to fight a determined bear move.  They just stop buying and let the bears do their thing.  The up/down volume will be critical.

I took the new motorcycle out for a short road trip this weekend and am hampered by a very puny internet connection.  I will also be traveling back on Monday morning so you guys will have to watch the store.

Charts link below.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2071209

cheers
O.

[la-onda]

 
Shadow update:
http://www.shadowtrader.net/videos/sunday060808st.html

cheers
Oliver

[AussieTrader]

The Week in Review June 30th

It was a bad week to be long the stock market, however ensuring you have awareness and exposure to sectors that are performing and stocks with strong fundamentals, you can begin to protect and position to take advantage of strength that may be out there. Also, being open to take advantage of downside price action either by being short or using an instrument like an ETF will again position your portfolio intelligently.

Last week we had:

Fed Meeting
Saudia Oil Summit – Oil Price Surge
Iron Ore Contract News
Consumer Confidence Report
Goldman Downgrades

The Fed kept rates on hold so no surprises here, but as usual when there is a Fed meeting volatility across the board tends to rise.

The Saudia Oil summit basically agreed not a lot except that producers blamed speculators for driving oil price; consumers blamed producers and exponentially growing demand from the likes of China all agreed were a major factor. Net result oil price continues to sore – This is why we have a heavy weighting of oil and energy related stocks in our portfolios

Last week some huge contracts were agreed for the supply of iron ore. BaoSteel (China's largest Steel producer  agreed to nearly 100% ore price increases from April 2008 deliveries from Australian producer Rio Tinto. This increase will set the benchmark for all other producer / supplier contracts. – This is one of the reasons we have exposure to resources stocks like Steel.

Consumer Confidence sank pretty much to multi year or all time lows in the US. Increasing gas and food prices, falling real estate values etc contributing to the chill wind. – This is a factor as to why we don't have exposure to retail stocks (just yet).

Goldman Sachs put out a bunch of downgrades and negative commentary. General Motors were cut to sell, GM's stock is down at historic lows, high gas pricing and low consumer confidence = not as many new gas guzzling SUV's being purchased = inventory glut. Various brokers were downgraded causing price drops and further negativity in that sector. Although it seems strange one financial house downgrading another, as I am sure the downgraded institution will return the favour to GS shortly!!

Indexes are searching for a bottom right now, some are weaker than others – The Dow for instance looking very poorly. What we may see happening is perhaps some short lived recoveries with prices moving up to resistance levels before failing and re-testing lows again. But at some point longer term bottoms will be found and put in place, so look out for huge volume capitulation type selling (people throwing the towel in!!) That type of action usually signals market bottoms.

In the meantime we will continue to position in sectors of strength as well position to profit from weakness.