Incometrader Commentary

Friday's Market Commentary & Sector Buying

Mike Coval — Sat, 04 Oct 2008 00:03:44 GMT

Updated late Tuesday and Friday nights
Friday’s Close for Oct 3rd, 2008
Written by: Mike Coval

The excitement is not over. Vote yes or no but either way the vote seems to be bad news for the index totals. Monday’s House no vote (on the $700 billion bailout/loan) sent the markets into a tailspin and today’s House yes vote sent the Down 471 points from its high. What is the average investor supposed to think about this?

To watch a video of Friday’s market action, along with my thoughts, Click Here. The DOW closed down 157 points at 10,325 while the NASDAQ closed lower by 29 to finish the day at 1,947.

Energy: It was rather calm on the Merc, Late in the day crude Oil futures were trading down $0.65 at $93.13 a barrel. Track the price of crude with the Oil ETF, USO.

Congress and the Bush administration approved a revised bill intended to rescue the struggling financial sector Friday. The bill was designed to bail out ailing financial companies and offer help to struggling mortgage holders. The legislation allows the Treasury to buy up Wall Street's toxic mortgage-backed assets, taking their weight of firms' balance sheets, thereby loosening the credit markets. The bill, which now includes added tax cuts and a temporarily higher ceiling on Federal Deposit Insurance Corp. guarantees, was approved by the Senate on Wednesday night.

Financials: Another large bank narrowly missed closing its doors. Wachovia, WB, agreed to be acquired by Wells Fargo, WFC, in a deal worth $15.4 billion.

Economic News: It seems investors were really looking at some of the economic news for guidance in their late day selling. The Labor Department said U.S. payrolls lost 159,000 jobs last month, the largest single-month decline in five years and well below economists' estimates.

Financials: In an effort to remain ahead of the troubles in the sector, UBS, will cut 2,000 jobs from its workforce, lifting its total job-loss count to 17,000 for the year. Most of the cuts will come from businesses being exited or downsized in order to protect and sustain the bank's core client franchises.

JPMorganChase, JPM, fell $4.06 on average volume after announcing it will let go of six high-ranking Washington Mutual executives, including chief executive Alan Fishman, after acquiring the bank. The rest of WaMu staff of 43,000 will be told about the fate of their jobs on Dec. 1.

Global Payments, GPN, shares closed up $7.87 on heavy buying volume. The company reported fiscal first-quarter net income of $57.5 million, or 71 cents a share, from $43.6 million, or 53 cents a share, in the first quarter of 2007. Revenue increased to $405.8 million from $311 million in the same period a year ago, said the Atlanta-based electronic transaction processing services provider. Analysts had forecast earnings of 60 cents a share on revenue of $394.2 million.

Consumer Non Cyclicals: Goldman Sachs raised its rating on Costco, COST, to buy from neutral, citing valuation and the group's business model. The broker told clients that the recent sell-off in the shares has created a compelling entry point for investors. It added that the warehouse model "carries greater relevance" in today's challenging macroeconomic environment. COST closed up $0.68 bouncing just above its strong $60.00 support.

Another company that seems perfect for tough financial times is Family Dollar Stores, FDO which said fourth-quarter earnings rose to $53.2 million, or 38 cents a share, compared to $37.8 million, or 26 cents, in the same period a year ago. Analysts were looking for earnings per share of 34 cents on sales of $1.76 billion. For fiscal 2009 the discount retailer sees earnings per share of $1.58 to $1.78 with sales rising 3% to 5%.

Technology: Adobe Systems, ADBE, fell $1.53 on increased selling after UBS cut its rating on the company to sell from neutral. The broker said that market volatility is hurting deal signings, visibility is disappearing and currency exchange rates, long an advantage for the company, could soon have a negative impact as the dollar gets stronger. UBS also told clients it has concerns about CS4, the latest update of the company's Creative Suite, because advertising spending has been slowing dramatically.

Good and or Bad Stocks to Watch: APEI, CHTT, LVS, VRSN, ERF, MCHP

Economic Indicators:

Monday Oct 6	Tuesday Oct 7	Wednesday Oct 8	Thursday Oct 9	Friday Oct 10
10-Year TIPS Announcement 11:00 ET	ICSC-Goldman Store Sales 7:45 ET Redbook 8:55 ET FOMC Minutes 2:00 ET Consumer Credit 3:00 ET	MBA Purchase Applications 7:00 ET Pending Home Sales Index 10:00 ET EIA Petroleum Status Report 10:35 ET	Chain Store Sales BOE Announcement 7:00 ET Jobless Claims 8:30 ET RBC CASH Index 9:00 ET Wholesale Trade 10:00 ET EIA Natural Gas Report 10:35 ET	International Trade 8:30 ET Import and Export Prices 8:30 ET Treasury Budget 2:00 ET

Coval’s Homework Training: Feel free to leave any stocks you would like to have looked at in the comments section (below) and I’ll try and choose one of the stocks and add it to my analysis for all to read. Please tell your investing friends about this blog as well. It is here for you and the more comments I can get from you the better it will be.

Homework: Finding a great stock is often easier than it seems. To see one of the more successful approaches to finding a potential investment, click here.

Cheers,
Mike

Tuesday's Market Commentary

Mike Coval — Wed, 01 Oct 2008 03:02:31 GMT

Updated late Tuesday and Friday nights
Tuesday’s Close for Sept 30th, 2008
Written by: Mike Coval

How about that? The largest one day point drop followed by a substantial gain. Even though the $700 bailout/loan did not go through, the markets are pricing in some sort of positive action before the end of the week. Will this give the markets more upside potential? I think so.

To watch a video of Tuesday’s market action, along with my thoughts, Click Here. The DOW closed up 485 points at 10,851 while the NASDAQ closed higher by 99 to finish the day at 2,082.

Energy: Crude oil prices recovered a bit after yesterday's slippery slope loss. Late in the day crude Oil futures were trading up $5.33 at $101.70 a barrel. Track the price of crude with the Oil ETF, USO.

Presidential candidates John McCain and Barack Obama endorsed a revised plan that would lift the ceiling on the Federal Deposit Insurance Corp.'s guarantee from $100,000 to $250,000 to calm investors and help prevent a run on the nation's banks.

The House is scheduled to reconvene Wednesday night, giving congressional leaders and administration officials at least two days to formulate a new plan and convince their parties that it represents an improvement over the last one.

Economic News: Some surprising economic data from the Consumer Confidence Index also helped to give another reason for buyers to be active. The report came in well above estimates for September.

Healthcare: Some good news for Pfizer, PFE, or at least that’s how investors are taking it. PFE gained $0.79 on increased volume on news it plans to exit the business of developing medicines for the heart and circulatory system. The changes are part of a larger program designed to cut costs and lift profits.

Diebold, DBD, bounced back up off its $31 support after stating it will raise its 08 EPS guidance above consensus. DBD expects to see a FY08 EPS of $2.40-2.45 vs $2.30. The upward revision in DBD's earnings expectations are a result of earlier-than-expected progress from its cost-reduction initiatives, improved profitability from the company's Brazilian voting and lottery businesses, continued demand for the co's solutions in the global financial markets and a lower anticipated effective tax rate.

Technology: A positive report gave Conexant Systems, CNXT a new life. The stock gained $1.13 on extremely heavy buying after it raised its fourth-quarter earnings forecast, citing lower expenses and better-than-expected margins. The semiconductor company said it now expects core net income of 24 cents to 26 cents a share, up from a previously forecast range of 13 cents to 17 cents a share.

Consumer Non Cyclicals: Shares of Timken, TKR, ended up 15.4%. The company said its raising its estimate for third-quarter earnings per share to $1.00 to $1.10, from 65 cents to 75 cents previously. For the full year, Timken also lifted its forecast, to a range of $3.30 to $3.45 a share, excluding special items, up from its previous estimate of $2.95 to $3.10 a share.

Good and or Bad Stocks to Watch: APEI, OSIP, CHTT

Economic Indicators:

Cheers,
Mike

Friday's Market Commentary

Mike Coval — Sat, 27 Sep 2008 02:56:52 GMT

Updated late Tuesday and Friday nights
Friday’s Close for Sept 26th, 2008
Written by: Mike Coval

Not a volatile day as compared to the past 2 weeks but as expected we did not see much buying either. Most investors decided to take the safe bet and free themselves of most positions going into this weekend. It seems the current market is driven by news and just about any news over the weekend could cause a dramatic move, in either direction, on Monday.

To watch a video of Friday’s market action, along with my thoughts, Click Here. The DOW closed up 121 points at 11,413 while the NASDAQ closed lower by 3 to finish the day at 2,183.

Energy: Late in the day crude Oil futures were trading down $0.98 at $107.04 a barrel. Track the price of crude with the Oil ETF, USO.

Financials: Is it a done deal or will it carryover into next week? Lawmakers pledged to keep working to hammer out a plan that satisfied Democrats and Republicans. "We're going to get this done, and stay in session as long as it takes to get it done," said Senate Majority Leader Harry Reid.

President Bush sought to calm the country Friday, promising renewed cooperation and quick results. "There are disagreements over aspects of the rescue plan, but there is no disagreement that something substantial must be done." "The legislative process is sometimes not very pretty, but we are going to get a package passed."

The Treasury's planned $700 billion bailout package appeared close to becoming law on Thursday afternoon, but hopes faded after lawmakers said they disagreed with key measures of a plan agreed upon in principle.

The delay sent the financial sector another blow that was quickly followed up with news that WaMu has now become the largest bank in U.S. history to fail. The government seized control of the firm, which had been weighed down by bad home loans and liquidity problems.

Economic News: The economy appeared in worse shape after a downward revision to the second-quarter gross domestic product. GDP growth was revised down to 2.8% for the period, disappointing traders and economists who had been looking for a slight bump in growth.

Consumer Non Cyclicals: KB Homes, KBH, gained $0.40 but offered little hope for investors of any near term gain. The homebuilder lost $144.7 million, or $1.87 a share, in the third quarter, down from a loss of $35.6 million, or 46 cents a share, in the year-ago period. The firm said its sales fell sharply as inventories jumped. "Market fundamentals appear unlikely to improve significantly in the near term, as foreclosures continue to rise, housing inventory overhang remains at historically high levels and mortgages have become more difficult to obtain," Jeffrey Mezger, president and chief executive, said in a statement.

Nike, NKE, quarterly earnings beat Wall Street estimates as Nike Brand President Charlie Denson cited higher-priced products recently featured in the Beijing Olympics as well as select apparel items for some of the growth. Net profit fell to $510.5 million, or $1.03 per share, in the fiscal first quarter ended Aug. 31, from $569.7 million, or $1.12 per share, a year earlier. Revenue rose 17 percent to $5.4 billion in the quarter. Excluding last year’s one- time gain, Nike said net profit would have grown 10 percent.

Transportation: Oshkosh, OSK gained $1.44 on heavy buying volume after the truck maker said its fourth-quarter earnings would be in line with or better than its summer guidance. In August, the firm offered Q4 estimates of 50 cents to 65 cents a share. The firm also said its debt would be lower than expected at the end of the year. Apparently, the recent drop in fuel prices has added to the bottom line.

Other forms of transportation have also been doing well. Norfolk Southern NSC, gained $2.06 on slightly heavier volume just as the MACD’s and Stochastics have started to turn higher.

Technology: Research In Motion, RIMM, was tossed overboard by investors who were not too thrilled with the company profits. RIMM posted solid revenue and net income growth for its latest quarter, however the company's results and outlook fell short of Wall Street's expectations. RIMM fell $26.77 to a 52 week low.

After falling nearly 40% over the past 2 months, F5 Networks, FFIV was upgraded from a hold to a buy with a $32 price target at boutique Stifel Nicolaus. The stock gained $1.35 and appears ready for an oversold bounce.

Good and or Bad Stocks to Watch: APEI

Economic Indicators:

Cheers,
Mike

Market Commentary and Commodities

Mike Coval — Mon, 22 Sep 2008 21:22:26 GMT

Updated Tuesday, Thursday and Saturday morning, pre market
Monday’s Close for Sept 22nd, 2008
Written by: Mike Coval

One, two, three, nope… Just when it appeared that we were ready to see some reason for the markets to continue to rally, oil exploded so fast the exchange floor halted trading. At one point it was up $25.00 having its largest one day point gain. Of course the higher energy costs had an extremely negative impact on the markets.

To watch a video of Monday’s market action, along with my thoughts, Click Here. The DOW closed down 373 points at 11,016 while the NASDAQ closed lower by 95 to finish the day at 2,179.

Energy: Investors nervous from the recent volatility decided to move over to the commodities market (at one point Monday all 19 commodities were higher) for some safety. With all the buying it drove oil to its largest 1 day pint gain and sent gold up over $900 per ounce. Late in the day crude Oil futures were trading up $15.45 at $120.00 a barrel. Track the price of crude with the Oil ETF, USO.

Financials: Most of the selling started in the financial sector where Goldman Sachs, GS and Morgan Stanley, MS, were granted permission by the Federal Reserve to convert themselves into holding companies, more commonly referred to as commercial banks. The change in the banks status will allow them to create commercial banks and shift the responsibility of their oversight from the Securities and Exchange Commission to the Fed.

The moves came as Congressional leaders remained in discussions about a larger federal bailout package, one that could include a new government facility for buying up firms' toxic assets. The plan could cost as much as $700 billion and said the national debt limit will be lifted to reflect that cost. Secretary Henry Paulson pushed Congress to act to move quickly on the bailout plan.

Technology: Not all news was bad, Microsoft, MSFT, was up $0.24 on increased buying volume on plans to repurchase $40 billion in stock. The tech giant also lifted its quarterly dividend by 2 cents to 13 cents a share.

3Com, COMS, reported better-than-expected results for its fiscal first quarter ended August 29. For the quarter, COMS posted revenue of $342.7 million and non-GAAP profits of 11 cents a share; the Street had expected the networking company to report $337.1 million and 6 cents. The stock gained 7.68% on heavier than normal volume as it bounced up off its $1.75 support. Perhaps in this volatile market trading a $2.00 stock is your safety net?

Consumer Non Cyclicals: AutoZone, AZO, fell $1.73 after posting a 12.2% jump in fourth-quarter profit, leveraging its new stores even as auto sales fell. The parts retailer earned $243.7 million, or $3.88 a share, up from $217.2 million, or $3.23 a share, in the year-ago period. AutoZone's total revenue jumped on its new locations, but same-store sales were fairly flat.

The volatility index moved back up by $1.78 to close at 33.85. The $35 area is acting as resistance however the index hit near $42.50 on Thursday before the buying spree started. Although we are not in a normal market, the index should find resistance soon and begin to fall. It is when the VIX hits resistance and starts to drop that we begin to see some buying across the markets. Will $1,200 on the SPX be that level or will we need to go back to the $1,135 floor before the VIX falls and the market’s rally. I’m hoping for the $1,200 level but I’m not keeping my fingers crossed.

Good and or Bad Stocks to Watch: NSC, APEI, EDU, TYC, BRCM, TAP, VSEA

Economic Indicators:

Tuesday Sep 23	Wednesday Sep 24	Thursday Sep 25	Friday Sep 26
ICSC-UBS Store Sales 7:45 ET Redbook 8:55 ET State Street Investor Confidence Index 10:00 ET	MBA Purchase Applications 7:00 ET Existing Home Sales 10:00 ET EIA Petroleum Status Report 10:35 ET	Durable Goods Orders 8:30 ET Jobless Claims 8:30 ET New Home Sales 10:00 ET EIA Natural Gas Report 10:35 ET	GDP 8:30 ET Corporate Profits 8:30 ET Consumer Sentiment 10:00 ET

Homework: Are commodities a safe bet again? Today the action moved from the equity trades to the commodity pits. See what our options are here.

Cheers,
Mike

Wednesday's Market Commentary

Mike Coval — Wed, 17 Sep 2008 23:19:28 GMT

Updated Tuesday, Thursday and Saturday morning, pre market
Wednesday’s Close for Sept 17th, 2008
Written by: Mike Coval

Lots of heavy selling again and this time on some not so bad news. The Dow closed down 449 points at 10,610 and the Nasdaq closed down 109 at 2,099. Heavy selling on both where the selling accelerated into the close.

Again I’ll keep this commentary brief and cover what I think is next. I wrote on Monday about why the markets are crashing lower and when a possible change might occur. Today I’ll concentrate more on what we as investors should be thinking of longer term and short term.

Longer Term: In the larger picture the current selling is not really as bad as it seems. Below is a 10 year chart of the Dow and we can see that in 2001 and again in 2002 the Dow had selling even more than we are seeing now. Although the distance dropped might be the same, the percentage decline was more 6 and 7 years ago. From those drops we rallied nearly 100% going from 7,000 to 14,000. So longer term we need to continue to invest in quality stocks/ETF’s with low P/E’s and increasing earnings.

Short Term: A bounce should be here shortly for the Dow. Looking at the one year chart below we can see two other times that the Dow has seen heavy selling, to the extent we have now, and after both of these we saw a noticeable bounce. Back in Jan 2008 and July 2008 the Dow was trending lower and bad news was forcing the index to yearly lows. Each time the Dow dropped approx 10% we quickly saw a bounce of 6% or more. We are now down 10% since the 1st of Sept so if history holds correct, we should see a bounce of 6% or more starting this week or early next week. Does that mean we should start buying calls and loading up on bullish positions? No! What it does mean is that we should not necessarily be thinking of selling at these lows. Wait for a bounce to begin and then see if you want to take a short term bullish trade or use the bounce to sell some of your less favorable positions.

Economic Indicators:

Thursday Sep 18	Friday Sep 19
Weekly Bill Settlement Jobless Claims 8:30 ET Leading Indicators 10:00 ET Philadelphia Fed Survey 10:00 ET EIA Natural Gas Report 10:35 ET	Quadruple Witching

Cheers,
Mike