The Market Week Ahead

First, US Employment Rate Report is Friday. October is almost here. This bear market rally looks like it’s ready to reverse once they take the bull off the stage. S&P500 going to 400 like some say and I think? Europe is releasing bank stress test results. There’s talk that the US Fed might start raising rates sooner than later. I’ve been saying all along, we have not seen the lows for stocks or real estate prices yet. I see them much lower in the years ahead. Then again I could be wrong. The market always shows the way through its fear and greed social mood.

The Market Week Ahead

The big important data reports this week are:

Tuesday: New Zealand 2nd Quarter Gross Domestic Product.

The Market Week Ahead

First, the market last week. The Dow gained more than 125 points while the S&P tacked on 15 points late Friday on news that the pace of U.S. job losses slowed more than forecast in July and the unemployment rate dropped for the first time in more than a year. One month does not make a trend so be careful on being overly optimistic just yet.

Scanning the Charts for Opportunity

As I scan the charts this Monday morning for some low-risk high-rewards trade setups for the week, I’m getting updated on this week’s news and upcoming events. The first thing that grabs my attention is this headline. China’s Leader Says He Is ‘Worried’ Over U.S. Treasuries. China owns $1 trillion of USA debt. Keep your eye on that significant one. President Obama says he’s going to be working hard this week to get more credit flowing again. The U.S. Securities and Exchange Commission will be meeting on April 8 to consider whether to propose short sale price test rules. I don’t think they should, but then again, maybe it’s a good idea right now. The Financial Accounting Standards Board is planning to discuss mark-to-market accounting rules on Monday.

It’s another Monday, and the financial news looks like this. AIG is supposed to get another $30 billion in bailout money, HSBC (HBC) has some more you know what write-offs, employment is looking worse than ever, Warren Buffett said he did “some dumb things” in 2008, Citigroup's (C) rescue plan may not be enough, dividend yields are getting slashed, and the USA recession seems to have no end in sight yet. Where do you put your money for a good return on investment with minimum risk in an environment like this? My answer, this week, is on the other side of the world.

Scanning the stock charts this Monday morning, I’ve zeroed in on a low-risk high-reward buy long trade on a big oil company in China. Last week oil prices fell about 1 percent with U.S. data showing the consumer sector shrank more than expected. On the other side of the world, I’m betting China’s oil demand will remain relatively high compared to the USA throughout this year, and increase more moving into future. If you’re a dividend buyer then you’ll be glad to hear this company is currently paying out a 5.39% yield.

As I run and analyze scans of the stock charts this Monday morning looking for low-risk high-reward trade opportunities, I’m thinking about CNBC’s “House of Cards” presentation on the what, who, how, when, and why of the current financial crisis which amongst many other mistakes made by different people, Wall Street created CDOs from USA’s Mortgage backed securities from the Subprime mortgage market, and corporate debt and selling them to anyone around the world that was looking for AAA rated investments. CDOs – Collateralized Debt Obligations. These structured products are highly complicated investments. The debt securities are bundled and re-sold but often buyers don't really know exactly what they are purchasing. Even Alan Greenspan admitted he was befuddled by the CDO. The why of this crisis is most easily answerable . . . money and greed for more of it. For the rest of the story I highly recommend you watch the presentation, and more than once if possible to learn this valuable financial lesson.

I pick stocks to buy or sell based on technical analysis first, then review the current and forward fundamentals to see if there is more support for a buy or sell. When prices are going up, and above levels considered to be normal, how does the market explain and or justify the price rise? A variety of reasons justifiable and not, with the number one reason being greed in my opinion. Example, why did Oil peak out at $148 or so a year ago, and why is it at $40 of so now? The bottom line is greed for it to hit 148, and now its fear that it’s down to 40 and below. Is it supply and demand? Well yes, and its fear and greed that fuels the supply and demand.

Last Friday the jobs report hit with another 598k jobs lost in January the market moved up in spite of the bad employment news. Now Wall-Street and Main-Street are looking to the government to pass the huge stimulus plan help things out. I’m skeptical as many others are as to whether the current rally is sustainable right now, whether the stimulus plan is passed and especially if it’s not. Back in 2008 the big bail-out money that was given out and the big Fed rate cuts just resulted in buy on the rumor sell on the news rallies. I’m betting the same thing this time again too.

Last week my stock pick was a short sell on Nustar Energy (NS). So far so good with tight stop-loss. This week I’m putting another short sell on another big energy company. Fundamentally, energy is a great investment long term as long as the economy is growing, but the oil bubble pop last year, with the economy now in the toilet with who knows when it’s getting better, and demand destruction still in place, the deflation environment is going to hurt everyone, and it’s showing in the energy stock charts.

This week, President Obama’s new administration will be dealing with Wall Street bonuses and executive compensation that will be included in the TARP program for those companies seeking money from TARP to heal them survive. Next week, the administration will be dealing with financial industry issues after discussions between industry reps and government officials over the weekend. Obama scolded Wall Street firms for giving out large bonuses, while at the same time asking the government and taxpayers for bailout money - a paradox, to say the least.

My technical scans this Monday morning are showing a lot of sell candidates. The market simply does not look that healthy right now, and things look like there still more pain to come before things get better. I’m looking at an energy company, which operates oil pipelines, storage facilities and asphalt refineries. It posted higher than expected quarterly profits last week, assisted by a three times increase in sales at its asphalt and fuels marketing segment. The company also provided a first quarter earnings range, the upper range of which was in line with analysts' estimates. Long term I like this company fundamentally. Short term, I’m seeing a low-risk high-reward short sale on it. Short it now, and or wait for a pullback to buy in longer term later on.

As I was scanning the charts early this Monday morning, my scans came up with a few more short-sell candidates than new buy long positions. It looks like the broad market is headed back down. Other than one that stood out this week, my scans didn’t really show any new buy or sell opportunities. What my scans did come up with is a buy long candidate on a stock that is going ex-dividend this month.

Buying long into dividend paying stocks and stocks that are going ex-dividend can provide a good reward to risk right now. Not all high dividend paying stocks and stocks going ex-dividend are candidates for this investing trading approach though. The financials might not be good candidates right now, as they still seem to be in financial trouble those companies involved in getting TARP funds are supposed to be restricted from increasing dividends, making acquisitions and buying back shares.

First I hope you had a good Christmas after the worst year economically that all of us have ever experienced in our lifetimes. I wish I could share some good news for the equity sector with you, but my chart work is not showing anything good just yet. I’m mostly short, and have been for the last three weeks with decent returns. I am seeing some upside in selected stocks but not that many compared to the short sells. I would be leaning toward the small caps for any upside surprises possibly. I was thinking the Santa Claus rally might materialize but it didn’t that much if at all.

Scanning the stock charts for some low-risk high-reward trade setups early Monday morning, I’ve zeroed in on a short-sell candidate in the biotechnology sector. I’ve been thinking for quite some time now that healthcare stocks are going to start losing their rich profit margins they’ve been enjoying for quite some time now, and with the change of leadership in the White House, and now with this current economic environment, 2009 could be the time the medical stocks start selling off even more than they have already. In fact I would forecast and predict this year that the healthcare stocks might be the next financial disaster to hit the stock market and economy.

Scanning the stock charts early this Monday morning, I’m seeing that the market is getting ready to fall again into an ending 5th wave of this current downtrend, which would then make me a big buyer at least for the short and intermediate term, and even possibly the long term, if it does happen. I really don’t expect a sustainable long-term rebound to the upside here, but the market could trade up possibly because the Fed is meeting today and tomorrow and the market is looking for them to lower rates. Maybe the rate reduction is already priced in? I'm betting it is and my shorts will do better than my longs this week. Get ready for options expiration at the end of the week. It should be very volatile to be sure.

My low-risk high-reward trade setup stock scans this morning popped up one of the world’s biggest steel producers as a short sale. I would like to buy into this steel producer but not at this price. I’m looking for the price of this steel producer taking another possible discount of 25% to 40% from its current price before the selling pressure stops. See below for more analysis on this short sale stock pick.

Scanning the charts this week, it’s ironic that the best low risk high reward trade setup I could find is with a company that checks and rates companies financial information and provides other business information services. Too bad the US taxpayers didn’t have this company check the credit rating of the Fed, Fannie Mae (FNM), Freddie Mac (FRE), and the banks before their liquidity over-leveraged credit crisis started unfolding onto main-street.

I think the lesson learned here is to always do your homework to prevent future disasters of the situations you get involved in. In this over-loaded information age, it pays to have some high-technology services to help you out with that. I'm buying long on information analysis services in this century for sure.

Scanning the charts this early Monday morning after the insane market action last week, which included the market tanking all week, followed by the big dead cat bounce rally on Friday, I was wondering what would pop on the radar screen for a buy or sell this week.

Actually not much of anything looked very interesting. Couple of crappy short sells, and no decent long candidates to my liking to speak of. No more naked shorting since the rule as been implemented by the SEC now, which means there's no more straight out short-selling for the time being.

After scanning the stock charts this early Monday morning, I’ve come up with two stock picks. One is a short-sell and the other is a buy candidate. The short-sell I won’t write about this week, because the long candidate is much more exciting and a longer term position than short-selling. I’ll just say the short-sell is Abbott Labs (ABT).

The buy candidate is a Chinese internet company. With over 1 billion people in China, investing in companies in any country with this population size is a simple no-brainer of supply and demand, and especially when it comes to new age, new school, new economy business of the internet. Remember when World War II ended? How many people were in the US? About 200 million? With China sitting at 1.2 billion people currently, this is a 6 times increase of that - quantum and exponential all the way, the likes of which the western world has never seen in the past, and may never want to see or imagine in the future. About a year ago, I was listening to Lou Dobbs on Bloomberg talk about how the rest of the world would be nothing without the US consumer, while I simultaneously read a report from the CEO of the Bank of China saying that domestic consumer demand there is growing at double digit rates. Who to believe? I’ll leave that up to you. My first question for Dobbs, however, would be, when was the last time he was in China?

I like living green just as much as anyone, so we can all work together to save the earth to be livable longer for us and our children children's.

My stock scan this week is a green publicly traded company. This week's scan has come up with an excellent low risk high reward potential, trade setup on a solar energy equipment manufacturer.

After scanning the charts this early Monday morning, I’ve zeroed in on an investment bank behemoth in the financial industry that sometimes buys up other competitors when they get into liquidity trouble, as they just recently did during this time of liquidity credit crisis. Longer term, we would be a share buyer of this excellent company. Near to intermediate term, I’m putting a sell on it.

Short Sale: JP Morgan Chase (JPM)

Scanning the charts early Monday morning, I zeroed in on a long candidate stock. You might think I’m crazy in a stock market like this to go long right now, but there are growth stories around the world to buy into. It’s a company headquartered in Argentina, and they’re involved in one of my favorite sectors right now, agriculture, and food production.

Long Position Cresud SA. (CRESY)

My weekly stock pick last week was Google (GOOG). Its earnings disappointed the Street, and I got stopped out as the stock price declined. I’m re-initiating a buy on it at its current July 18 Friday close price of $481.32;  stop-loss is $440.00. I’m seeing the major, intermediate, and minor fifth waves possibly ending here and opening up an opportunity for a possible reversal to the upside.

Scanning the charts this week, I’ve found a China company that I like for the long-term, but in the short-term, technically it looks like its got a little more downside to go. The China stocks are good investments in the long-term with the growth story going on there, but short and intermediate term, they might see a little more downside on the stock prices after their big upside price runs of 2006 and 2007. Remember, this is a short-term sell recommendation, as I would be looking to accumulate this stock for multi-year, long-term positions anytime now.

My scan of the charts this week came up with a company that almost everyone on the internet knows about. I’ve been looking to get back into this stock for a while; I first got in at the IPO back in 2004, then sold in mid-January of this year when the entire market was going down hard and heavy. My basis for this position on the stock is purely technical. The fundamentals over the years have spoken for themselves.

Buy Long on Google (GOOG)

Another down market last week. Trying to find long candidates in a market like this is tough, to say the least. Selling short was pretty easy over last two weeks, as it seemed just about everything was going down. There have been some bull winners longer term. The agriculture sector stocks have done real well these last fifty two weeks. I don’t like chasing prices, so I have not been in on the big bull run of this sector, until now.

After scanning the charts, up popped on my radar a low risk high reward trade on a basic materials company providing key ingredients to create fertilizer. I’m personally involved in the agriculture industry somewhat, and have done much research as to what the future holds for this industry. I’m a bull long term on this industry for two main reasons. (1) The ongoing global food crisis, and (2) the fact that the emerging countries around world are only using about 30% of the fertilizer the western world is using. These two main factors can contribute to a substantial amount of growth going forward long term in this industry and these stocks.