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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Market Notes: China Rocks/Building Stocks On The Rocks -- July 28

    Last week's sell-off extended into today's morning session but abruptly turned around when the bulls came charging back. While most of the major averages were able to climb back into the green, the inertia on the Dow Transports appeared to be too much for the bulls to overcome. This is not a good sign and today's rally could be just a one-day event. While the market internals aren't bearish, they're not very bullish, either. Maybe the dog days of summer are upon us...

    Stepping up: China, Africa jump to new highs
    Chinese etfs have been soaring recently and today both the iShares China Large-cap etf (FXI, $41; Yield = 1.7%) and the SPDR China etf (GXC, $82; Yield = 1.8%) both broke out to new highs on heavier than normal volume. In fact, there isn't one long-based Chinese etf that hasn't been going nuts. I don't know when the honeymoon will end but it sure doesn't appear to be anytime soon. For those of you who are in either of the above-mentioned funds, please note the next levels of major resistance: $85 for GXC and $42 for FXI.

    Emerging markets have also been out-performing and today two Africa funds broke out to new highs: Market Vectors Africa fund (AFK, $34; Yield = 2.4%) and iShares S. Africa fund (EZA, $72; Yield = 2.2%). Both of these charts are quite bullish and many Wall Street pundits are saying that Africa is the place to be.

    Falling down: Building stocks continue to tumble
    If you had been paying attention to building and construction stocks, you wouldn't have been shocked to hear that pending home sales were down much more than expected for the month of June, as reported early this morning. The following stocks have been in free-fall for months and continue to slide to new yearly lows:
    1. Window & door maker PGT (PGTI, $7.39)
    2. Gypsum wallboard maker Continental Bldg (CBPX, $12.58)
    3. Siding & fencing maker Ply-gem (PGEM, $8.84)
    4. Modular carpet maker Interface (TILE, $16.07)

    Today's break-down in the Home Builder etf (NYSEARCA:XHB) indicates further downside for this industry group.

    Jul 28 5:40 PM | Link | Comment!
  • Market Notes: Time To Buckle Your Seatbelt? -- July 23

    While the S &P 500 (SPX) and the Dow Transports (DTX) both managed to eke out another new high (all-time high for the Transports), there are cracks beginning to form in the bulls' armor. To wit the following:
    1. The DTX--a leader in market direction--was actually moving down from the open, in contrast to the SPX and Nasdaq.
    2. Despite the gains made over the past week, the small-cap Russell 2000 (RUT) hasn't been able to close above its previous support level at 1160.
    3. While the VIX is still firmly planted in the bulls' garden, the implied volatility of the VIX is rising.
    4. Buying pressure is drying up and selling pressure is increasing, as measured by the VWAPs (a measure of institutional buying and selling).

    Now this doesn't mean that the market is going to reverse tomorrow, but the ground isn't looking as firm as it has been. While this earnings season seems to be humming along, stocks are starting to become fully-valued and once the bargains are gone, who will be left to buy?

    Today's Notable Movers & Shakers
    It was hard not to notice the 300% move in Puma Biotechnology (NYSE:PBYI). The stock soared on news of a MUCH better than expected cancer drug trial. While this situation is the wet dream of many investing in these early-stage biotechs, it's worth noting that this is the rare exception rather than the rule. Playing these biotechs with serious money is highly risky and more people have been sent to the poor house by betting on them than by those who have profited from them. I know the ones who need to hear this are the ones who don't want to--please don't let that person be you! Playing with money you can afford to lose is the only prudent way to gamble. (I don't mean to be a downer but I've seen too many acquaintances lose their shirts over betting the farm (literally) on these biotechs with drugs that are promised to be "sure winners.")

    On a cheerier note, the airlines continue to head into the stratosphere. Breaking out of recent consolidation today were Southwest (LUV, $29; +3%), Allegiant (ALGT, $125; +2%), JetBlue (JBLU, $11; +5%). Chartwise, these stocks appear to have the wind at their tails and further upside looks likely. However, these stocks, too, are becoming richly valued (unless the companies have raised their forward P/Es) and should the market start to crack, these stocks could fall with it. Replacing long stock with long call options might be a less risky way to play richly valued stocks in extended rallies.

    Jul 23 5:27 PM | Link | Comment!
  • Market Notes: A Note On Ackman's Herbalife Fiasco -- July 22

    Well, Bill "Egg-on-his-face" Ackman's earlier supposed expose of Herbalife's (NYSE:HLF) business malpractices lit a spark under investors--but in the wrong direction. The facts didn't live up to the hype and the resultant sigh of relief sent Herbalife stock soaring into the close, gaining a whopping 25% on the day. That's the biggest one day rally in years. Adding insult to injury, Herbalife management said they are considering suing Ackman for slander. One wonders if employees of Ackman's Pershing Square Capital aren't quietly dusting off their resumes in fear of a mass exodus out of his funds...

    On a tangent note, I do think it may be impossible for Ackman to bring Ponzi-scheme charges against the company. In other previous court decisions, it was decided that multi-level marketing (NYSE:MLM) companies such as Herbalife, Amway, and Nu Skin do not operate as Ponzi schemes if a product is supplied to the end use, as it is in all of these cases. These companies have a battery of highly paid attorneys to keep them on the right side of the law and I have questioned Ackman's motives in going after Herbalife from the very beginning. Even Carl Icahn couldn't find any wrong-doing with it and proved his case by making a tidy profit from buying a chunk of stock and riding it up. (Icahn may have exited his entire position by now.)

    Although I've never used Herbalife's products, I have friends who say they are very good and are repeat buyers of their products. As for me, I've been a customer of both Amway and Nu Skin and think they both offer superior products (although Nu Skin's items are a bit pricey). Honestly, I'm not a fan of the MLM concept and I've never met a person in any of the above mentioned companies who was able to make a decent living off of selling MLM products. If these companies are guilty of anything, it would be the way they lure people into being distributors by promising them income streams that are neigh impossible to attain for all but the most savvy and dedicated (and with a lot of time to develop an underlying distributor base). If stretching the truth is a crime, then yes, I would find them all guilty...but not of operating a Ponzi scheme.

    Jul 22 6:04 PM | Link | 8 Comments
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