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+++++NewsPicks++++++
A Financial Publication for the short term trader/Investor
July 19, 2001
Tonight's Commentary:
Wed. was a bizarre day I have to tell you. First the futures were in the
toilet because of the earnings from Intel the night before. Then the CPI
came in higher than expected, and that shook traders. The housing numbers
were a bit more troubling than most admitted. Sure new home starts were up
3%, but permits, the papers needed to start new ones, were down 3%…a stand
off. But it was clear as glass just 20 minutes into the day that they were
going to blow off the Intel report and the higher CPI, and the mixed
housing report and let the market rise.
Then at 10 am the market started sliding. Then it picked up speed. What
was going on? There weren’t any warnings crossing the tape. Nobody had
started a war in the Mid East. Hmmm. Then we saw the initial testimony
transcripts from Greenspan and there was the key. He was addressing the
Washington assembly and I have to tell you I was “shocked” at what I
heard.
As you know I have had to listen to Greenspan for many years, as torturous
as that is, so I can try and outguess the old guy. Well I have never heard
him as “scared” as I did when I replayed the tape Wed. afternoon. He was
NOT hyping the effects of his rate cuts, his monetary expansion and his
banking initiatives. What he WAS doing was warning just like the hundreds
of companies we have been hearing from. He was warning that there may be
more pain, more slowdown and yes maybe more rate cuts.
So, we had the answer to our riddle, why was the market tanking? Because
they wanted to hear some positive things about the economy and he had none
to give. The street loves rate cuts, but guess what? The first 6 haven’t
done much and now they want to hear about improvement, not more rate cuts.
So, down we went, ending the day with the DOW down 36 (it was down over
100 at times) the NASDAQ down 51. But those numbers lied.
Why lie? Because a ton of stocks lost 4,5, even 6 points. It was a
crushing day. Then after the bell we heard from IBM and guess what? They
didn’t lie for a change. Sure they came in “in line” but they didn’t say
life was grand. In fact they said next quarter would be tougher than this
one and they are looking at softness for the balance of the year. Ouch.
We had expected IBM to lie. To say things were starting to improve. Well
guess what again? They must really stink to have the most creative spin
givers in the game, saying “forget it, we are up against a really tough
quarter”. Did they do that so they could beat the numbers next quarter and
look great? I don’t think so folks. I think they did it to warn that
things are as tough as ever and they don’t see the orders flying in the
door. To “lower” expectations. It wasn’t what the market wanted to hear
and they traded down 6 bucks in after hours on the statements.
Then something very interesting happened. The futures improved before the
session ended and that didn't "smell" right. Sure enough, Nokia came out
overnight with pretty decent numbers and good revenues. That breathed new
life through the Global markets and we woke up to very attractive futures.
Then the initial jobless claims fell nicely, the trade gap narrowed and
when we opened it seemed like all was right with the world again! We
opened nicely, and in moments were up 90 on the DOW and 35 on the NASDAQ.
We spent the bulk of the day comfortably higher and then in the late of
the day, we watched things coming down and down. By 3 pm the DOW went
negative after being up 100 again. sheesh. Why? Fear and lack of volume.
Although the volume in the morning was fine, by the early afternoon it had
dried up and by 3 they were worried about MSFT earnings. As much as we
would have liked a really strong day, the fact that we melted negative,
and then rebounded was "fine". We ended the day with the DOW up 40 and the
NASDAQ up about 30.
After the bell we started hearing from the companies that were slated to
release. First out was PMCS who seems to have missed by a penny. Then SUNW
came out doing pretty well, beating by 1. FLEX missed by one on decent
revenues. Overall the reports were mixed as usual. some said "decent"
things some said "lousy" things. Finally we got MSFT and they were funny.
Without the losses from investments they gained a penny. With them they
posted a big loss. The street wasn't thrilled either way as they are down
over 2 after hours.
Once again we have to ask "What now?" I think the herky jerky earnings
move higher is still intact, but what a lousy one its been. With all the
negativity out there, we think its probable that we open poorly, but I
also think its possible they turn it around and we end the day on a
positive note. Is that being too optimistic? Not really, things are beaten
so badly, that it almost feels they are "tired" of beating. Now they just
want to run them up, and profit take them, like daytraders.
So, for tomorrow, hang onto your hat. Its a Friday in the Summer, its
option expiration day, and we are in earnings season. That adds up to a
ton of wicked, bizarre movements and you will have to be quick to make
money. but unless something bad happens between now and the open, we think
a poor open will be followed by a decent push higher later in the day.
"lets "hope".
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Split Announcements:
Wed. we did get a split announcement this time from:
Kinder Morgan Energy Partners, L.P., (KMP) is a pipeline master limited
partnership and a products pipeline system in the United States. The
Company manages a diversified portfolio of midstream energy assets that
provide fee-based services to customers. The Company's assets primarily
include more than 10,000 miles of product pipelines and over 20 associated
terminals serving customers across the United States; 10,000 miles of
natural gas transportation pipelines, plus natural gas-gathering and
storage facilities; Kinder Morgan CO2 Company, L.P., a transporter and
marketer of carbon dioxide and over 25 bulk terminal facilities which
transload coal, liquid and other bulk products. They trade a relatively
light volume, averaging just 125K shares a day.
Today we got one from Dime Commuity Bank (DCOM) who declared a 3 for 2
split but WARNING they often trade an average of just 45K shares a day.
That is too light for us to follow.
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Split Runners:
A split runner is a stock that may follow a fairly common pattern. That
pattern is that approximately twelve trading days before a stock executes
its split, it usually begins a run up into that split and sometimes these
runs can be very powerful. For the short term trader, no other short term
hold has as much potential to put money in your account. BUT remember,
when the market tanks, split runners will tank also. When the market is
flat to rising, they usually outperform the market.
NOTE>> Even stocks heading into a split get smacked when the overall
market is in the toilet folks. Do not let the market take your money. If
the stock is weak...don't buy it.
July 27 (splits the evening of the 26th)
Taro Pharmacetical (TARO) will be doing a 2 for 1 split and Taro
Pharmaceutical Industries Ltd. commenced operations as a manufacturer of
solid dosage form products, but an agreement with American Home Products
Corporation in 1954 allowed the Company to expand operations to include
sterile products. Trading in the 460K share a day range, they have a
stunning chart that starts at 11 dollars and goes to 90 in the last 52
weeks. Friday they closed out at 77.40, and that was two down days in a
row for them. Monday they did bounce a bit lat in the day gaining 15 cents,
but that was far short of the 78.50 level we need to see before getting
in. Tuesday however was a different story! The boitechs were strong across
the board and they opened at 78 and started moving higher almost
immediately.
They blasted past 78.50, and we entered almost a dollar higher at 79.20.
Not to worry! They simply kept going, ending the day at 84.50! As is the
case with big moves, we did sell half the holding at the close to lock in
those gains. Wed. they amazed everyone by simply gaining another 5+, and
today it was 6.91 more! Amazing run folks and almost a full 20 dollar
runner from where we got it. but now you really have to watch for a smack
down, this thing is tremendously overbought. Any weakness and we are
'gone".
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Tonight's Tutorial: (Knowledge is key in this business!)
One of the bright spots of my day is reading email questions from readers
and this morning I got one that I would like to share. It basically read
"This morning the trade gap narrowed more than people thought it would.
Isn't that great news?" Lets explain how this works.
The trade gap, or imbalance if you will is simply the difference between
what we import versus what we export. Now, if things were really healthy,
we would be exporting more than we import, and that would mean our
factories and US Workers were happily employed and selling our wares
around the globe. Unfortunately this hasn't been the case in quite some
time. We import much more than we export. Why? Mostly because of pricing.
We have a very hefty wage scale here in the states. We also have
tremendous "red tape" when it comes to building a new plant or building.
For instance just to open a new plant you have to go to the township, hold
public meetings, talk to the people (who never want a factory in their
back yard) then its the environmentalists. Studies about endangered moths
that live in the area have to be done, rain shed studies, eco-impact
studies. It can take years and years, and many millions of dollars before
the first spade of dirt gets moved.
In Asia, India, Mexico, Brazil, and 90% of the rest of the world,
countries will bend over backward to have someone build a plant. They
don't have the environmental nightmare to deal with, and as far as public
resistance...well most of the locals need the income that a factory would
bring, a lot more than they are worried about the loss of a moth. So, they
can build plants overseas for a fraction of the time and the expense of
building in the US. It is one of the prime reasons we are no longer a
manufacturing society. We can't afford to be. And the things we produce
here have to be priced very high just to satisfy the taxes, wages,
INSURANCES, environmental regulations, etc and still make a profit.
So, a shift in import/ export figures started many years ago. We started
importing more cars, steel, copper, toys, TV's, you name it, then we
exported. this became the "trade imbalance" and no, no matter what you
have ever heard, it isn't good that we have one. But we do and its part of
our economics now. So, on the surface, seeing the trade gap narrow must
mean that we are finally starting to export more than we import right?
Well, if things were healthy the answer would be yes, yes indeed.
Unfortunately they are not.
Today's trade gap numbers simply showed that we are buying less from
overseas. The import numbers dropped, not because we are doing a lot more
selling globally, but because spending has dropped and we aren't taking in
as much as we were. But we still import 28.34 billion more than we export!
So yes it came down from the lofty 34 billion numbers lately, but don't
get deluded into thinking this is some type of great news okay? It simply
means we are spending less on imports (actually everything) than we were.
I hope that helps you understand why although the number "seems" good, its
kind of misleading.
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Some Thoughts: (Just some things bouncing around in our heads)
Last night GENZ announced good earnings and even said they would grow at
25%, but they popped out of the gate and melted down for the balance of
the day. We feel that was just profit taking that hit the sector. If they
start higher, keep an eye on them, we feel they could run.
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Tomorrows Plays:
ALL NEW READERS PLEASE READ THIS!
Very few stocks can move up if the sector they are in is getting hammered.
So the first step in making a successful trade is to isolate a strong
sector in the morning. How? ASK your broker, watch CNBC, read the Daily
Post, listen to Bloomberg, etc.. When you have found a sector that appears
to be strong that day watch the stocks on the list (in that sector) at
about 10AM (eastern) What we are looking for is this: a strong stock in a
strong sector that has run up, pulled back and now has powered up again
and is at or just about at the high of the day at that time. If you find a
few, they should/could continue to rise for the balance of the day. This
is a conservative approach, but used correctly this method, and these
lists have made thousands of people many thousands of dollars.
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Short Term Holds: (one day through approx two weeks)
Techs:
Wed. stunk pure and simple. What could have been a nice follow up to
Tuesday 's moves were snuffed out by none other than Greenspan himself. As
much as I wanted to believe we could hold on, we got stopped out of
several positions that I just "knew" would rebound, but hey, better safe
than sorry right? Then hearing IBM tell the truth instead of spinning a
lie was reason to believe that stopping out was the best move.
Overnight the news improved as Nokia did pretty well on their earnings
report and breathed some new life in the market. So everything bounced
back this morning and it hurt to see that we sold dell for a 10 cent loss
and it was up over 1.50 this morning!
So we got out of DELL and VRSN. DELL came back nicely today, VRSN bounced
early in the day and then fell even more. Ouch. So, that had left us with
just a few techies, ADVS who has done spectacular, and CTXS who was
struggling and we dumped them. NVLS and LRCX we bought today.
After the bell we heard a slew of earnings like VTSS, PMCS, SUNW, etc. and
the results were mixed. PMCS for instance says inventories are burning off
quickly, while VTSS says inventories aren't going anywhere fast. Its
really hard to decipher what the real deal is. Gateway missed by 1 cent,
and then we heard from Microsoft and that was almost funny.
If you place in the losses on investments they missed horribly. but if you
take those charges out, they beat by 1 cent on previously stated revenues.
Well the Street liked that better than the losses, but after hours they
are trading down almost 2 bucks.
What's it all mean? I think tech is going to try and push higher again. I
think the late day bounce, MSFT doing what they said they would, and some
of the chip makers saying good things will give us a bit more oomph. But
it won't be easy. It is no stretch to think we may have a gap down open.
If we do, I think it will reverse and push higher. Granted the earnings
run this quarter has been horribly wounded, but its trying anyway. So here
is the deal...if we do indeed gap down, watch for a reversal to the
upside.
Is there anyone who we want to add to the pot? Well we have some software,
and some chip equip. makers. I do think that we should re enter DELL and
we will if it holds over 28 tomorrow.
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Telecoms:
Early this morning NOK came out with better than expected results and that
fired up the telecom outfits. We saw them move higher and drag a lot of
others with them. We had stopped out of PCS ahead of the earnings and they
did well, popping back up today. So what do we want to do here? Against
all sanity we held on to DISH and we were happy they were up this morning,
but then had to sell it as it fell like a rock later. We would enter that
again if it could get over 30 and hold. Anyone else? No, we don't need any
headaches here.
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Internets:
AOL got hammered and this is exactly why we often repeat the warning about
not holding a stock through earnings. Sure the revenues came in a tad
light, but 9 billion dollars is still a lot of revenue don't ya think?
Well nothing we can do but wait. Now, our other favorite EBAY is very
interesting. they beat by 3 cents on big revenues. So why are they just
holding on after hours? Because they said that this was a great quarter
and they didn't know if they could keep this kind of growth up again.
That's just simple honesty. We like EBAY and if they don't tank we will go
in.
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Drugs/Healthcare:
Well we got out of ESRX with a very nice gain, and we are basically naked
in the healthcare/drug patch. Are we interested in anyone? Yes and no. We
think THC is attractive as an earnings run play, but they aren't in gear
yet and it may be too close to earnings to try. We are going to pass on
the sector for tomorrow.
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Biotech:
What a wild day the bio's had. They were up huge in the morning and then
melted later in the day. There wasn't a lot of reason for it, but it
happened. Now, we have two of them one, TARO has been fantastic, in fact
it has gained almost 20 bucks a share for us!!!! What a play! Just note
that it is so extended that we may have to pull the plug on this play
before it reverses in our face! The other, GILD isn't on fire but it
hasn't melted either. We are still in them. If the bio's bounce back up
tomorrow which is possible if money comes out of electronic tech, we are
only interested in one more, IMCL. We would enter them if its clear they
will end the day over 44.75 tomorrow.
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Retail:
We still have WMT, LOW, HD, BBBY and JCP and all of them are doing "okay".
Little JCP is the real winner (who'da thunk it right?) but so far so good.
We don't want to add any here, this is a full load for us, but we like
them. If we were to look at anyone else its BBY who no doubt will get some
tax money soon.
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Financials:
Financials have been very mixed and very lumpy and no we simply don't want
them right now.
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Services/Manufacturing/Transports/Energy/Oil/Miscellaneous:
NONE
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Daytrading: (volatile stocks for big up and down moves)
The stocks we mention under this heading are going see violent mood swings
folks. They are NOT necessarily long plays, they may be screaming shorts.
We put them here because daytrading needs movement, and these will give
you that movement. Again not just long or short, but volatile is the key.
For tomorrow watch> MSFT, SUNW, MERQ
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Split Hopefuls:
(stocks that have a 50% chance or better of announcing a split within 2-4
months)
None
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Current Holds Table
> investyourself.com <
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Consider Buying/Shorting Table
> investyourself.com <
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Recent History Table
> investyourself.com <
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