Michael Michaud's  Instablog

The Markets Last Week

US stocks commodities dropped last week as bonds and the dollar gained over the Dubai debt crisis. Mohammed El-Erian of Pimco says the Dubai problem is a “correction” while Dennis Gartman says the Dubai problem has “legs” for further downside. Our take, it could be a setup for a much larger decline moving forward. We do think Asia is in the best position currently to weather further global economic storms with its decent to robust growth and other factors, but global financial contagion can infect the rest or the world very easily. The decoupling effect of global financial markets is a nice theory, and I would even like to believe in it, but I have yet to see it clear evidence of that yet, although it could very well be in the works as I’m writing this. The keyword here is pay attention and be ready to move into or out of positions to protect yourself.

The Markets This Week

Dubai is the big story currently. The stock market this week could be more volatile with Dubai trying to reschedule its billions in debt now. The November USA jobs report will be of key interest to see if the economic recovery is sustainable or not. Australia and European Union interest rates decisions are of key importance also.

Important Global Economic Reports This Week

Monday: Canada Gross Domestic Product, and Australia Manufacturing Index.

Tuesday: Australia Interest Rate Decision & RBA Commodity Index. Switzerland Gross Domestic Product. German Unemployment Change. USA ISM Manufacturing.

Thursday: European Central Bank Interest Rate Decision and Euro-Zone Gross Domestic Product.

Friday: Canada Unemployment Change

My Stock Pick This Week

Is a buy long position on a satellite TV operator. The chart is positive with the trend up in a 3rd wave advance which is the longest wave of the 5 waves in the Elliott Wave count. Fundamentally it’s a rearview mirror mixed picture with their third-quarter net income increased marginally to $366 million and earnings per share climbed 12% to 37 cents, boosted by a lower share count. Revenue grew 10% to $5.5 billion. DirecTV's gross margin declined from 50% to 49%, but its operating margin remained steady at 13%. A quick ratio of 1.1 demonstrates adequate liquidity. The stock has rallied 40% this year already. Short interest has risen 14.2 percent to 136,331,890 shares. The stock trades at a price-to-earnings ratio of about 25, a premium to the market and cable and satellite peers currently. They do not pay any dividends. This stock currently presents a nice low-risk high-reward opportunity in my opinion. In case the price heads lower, stick to stop-loss.

Buy Long DirecTV – Ticker DTV

Buy Entry: 28.58 to 32.30

Stop-Loss: 27.98

Take Profit Areas: 35.81 to 36.50, 39.40 to 40.16

DirecTV Company Profile

The DIRECTV Group, Inc. provides digital television entertainment in the United States and Latin America. It operates in two segments, DIRECTV U.S. and DIRECTV Latin America. The DIRECTV U.S. segment provides direct-to-home (DTH) digital television services, as well as multi-channel video programming distribution services in the United States. As of June 30, 2009, the segment had approximately 18.3 million subscribers with access to channels of digital-quality video pictures and CD-quality audio programming. It distributes approximately 2,000 digital video and audio channels, including basic entertainment and music channels, premium movie channels, regional and specialty sports networks, Spanish and other foreign language special interest channels, pay-per-view movie and event choices, and national high-definition television channels. This segment also provides premium professional and collegiate sports programming, such as the NFL SUNDAY TICKET package, which allows subscribers to view the NFL games. The DIRECTV Latin America segment provides DTH digital television services in Latin America and the Caribbean, including Puerto Rico. As of June 30, 2009, PanAmericana and Sky Brazil had approximately 4.17 million subscribers and Sky Mexico had approximately 1.79 million subscribers. The DIRECTV Group, Inc. has a strategic partnership agreement with Qwest Communications International Inc. to offer DIRECTV services to residential customers. The company was founded in 1977 and is based in El Segundo, California.

Click here to review and trial the Trading Software we used in determining our buy long position on DTV.

Click the DirecTV Stock Chart for a larger view.

Currency Forecasts - Intraday Daily Weekly Monthly

Glance at the recent news headlines, and it might feel like the world is ending for the U.S. dollar. Take a look at this sample line-up:

* US investors abandon the falling dollar to buy stocks (The Times)

* Dollar Slump Persisting as Top Analysts See No Bottom (Bloomberg)

* WORLD FOREX: Dollar Declines As Investors Embrace Risk (Wall Street Journal)

But "feels" is one thing -- and the reality of the situation is quite another. If you haven't recently seen a chart of the EUR/USD, the world's most watched (and traded) exchange rate, take a look at this November 23 chart from EWI's intensive Curency Specialty Service:


Despite the near-panicky headlines, you can see that for most of November the EUR/USD has gone sideways! Yes, big swings up and down -- but almost zero net progress, so far. In the words of EWI's president Bob Prechter,

"The headlines this month are all about the weak dollar, but they should be about how the dollar is hardly falling any more despite ubiquitous bearish opinion about it." (November Elliott Wave Theorist; online now.)

To find out what this sideways price action implies for the dollar short-term, read the latest EUR/USD intraday and daily forecasts inside Currency Specialty Service now.

Click here for the Currency Specialty Service

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