More Sitting less Trading

I took some real effort not to trade today but with the jobs number tomorrow and the whippy market action that is what I did.

I am not sure tomorrow's data will matter with the trends as they are but a new short-term trend will have an easier time getting started once it is out of the way. The interest rate market is focused on central bank flows the price of oil is determined by the weather. Tomorrow's number may cause some noise but I am not sure it can change any of the bigger trends.

I noticed a few positive charts today: PAL, ALTI, CAD, and WTW to name a few. SMRT had a sharp pullback in an uptrend. The apparel retailers have put together an impressive 2 days.

FYI, what I do with names like these is just add them to a watch list and see what develops. I pick them out on obvious patterns like strong volume, new highs, moving average crosses, or gaps. If they are near a good stop I may enter a trade quickly but these patterns create crowded trades so waiting for a shakeout of some sort is my preference.

Napster Raises Revenue Guidance

The main impact of this is on Apple (AAPL). I view it as a positive and if AAPL breaks that small near term range to new highs it could really put in a big day.

This is the story on Napster.

Napster (Nasdaq: NAPS), the biggest brand in digital music, today raised guidance for its fourth fiscal quarter ending March 31, 2005. Napster now expects to report revenues of approximately $15 million for the fourth quarter, an increase from its prior projection of $14 million. "We are raising our guidance based on robust growth in our subscription service," said Chris Gorog, Napster's Chairman and CEO.

Mark Cuban is Happy he sold Mamma.com

The .com billionaire has an interesting thread going on short selling. I agree 100% with his view that a company's complaints about short interest are a giant red flag. He ends with an interesting little tidbit on former highflier Mamma.com (MAMA).

4. Finally, and this has nothing to do with Naked Shorting, I wanted to reference Mamma.com. I had purchased stock in Mamma.com in hope that it could be an up and coming search engine. I thought I had done some level of due diligence. Talked to the company management. Talked to some employees who worked in sales. Read the SEC Filings. I knew that they had a checkered past and had been linked to stock promoter Irving Kott, and that their law firm still handled some of Kotts business, but the CEO, Chairman, lawyers all said that things were reformed and the company was focused on its business.

Then the company did a PIPE financing. I'm not going to discuss the good or bad of PIPE financing other than to say that to me its a huge red flag and I dont want to own stock in companies that use this method of financing . Why ? Because I dont like the idea of selling in a private placement, stock for less than the market price, and then to make matters worse, pushing the price lower with the issuance of warrants. So I sold the stock.

I bring all of this up now, because in one of the comments in the Naked Shorting thread, a poster mentioned Lines Overseas Management of Bermuda and how there had been allegations made against them (http://www.theroyalgazette.com/apps/pbcs.dll/article?AID=/20...) That rang a bell. Turns out this was the same company that Mamma.com's current CFO used for a private placement for Mamma (http://www.sec.gov/Archives/edgar/data/839435/00010842410300...)

I said at the top that I found out some interesting things in this thread, this was probably the most interesting. I will leave you to make your own decision as to whether this connection matters or not. I'm glad I sold my stock.

Adding Contrahour to my List of Blogs

The community of market blogs is growing rapidly and the quality seems to be picking up too. Contrahour is quite new but looks like it is well worth checking out.

Continued Focus on Semiconductors

Bloomberg:

U.S. stock-index futures fell, as shares of Intel Corp. declined amid concern about a slowdown in the semiconductor industry.

Novellus Systems Inc., a chip-equipment maker, dropped after saying Japanese demand may weaken.

Computer-chip makers may slow worldwide spending this year to $44.1 billion after additions to production last year resulted in excess capacity, according to a report today by market researcher ISuppli Corp.

The semiconductors did not manage to breakout to the upside yesterday and look set to fail today. I am watching the recent low in KLAC (near $47) to gauge the weakness.

Australia at a Crossroads

This is what happened to Australia's currency last night.

The Reserve Bank of Australia (RBA) today raised official interest rates by 25 basis points to 5.5%, just hours before national accounts estimates reported that the economy grew by a dismal 0.1% in the December quarter 2004. This slowed annual GDP growth down to just 1.5%, very low by recent standards. Exports were a big drag on the economy, coupled with falling inventory levels. (from New Economist)

I also ran across this yesterday detailing some other long-term problems the currency may have.

The current account deficit has grown to more than 7 per cent of the economy for the first time in half a century, as the nation racks up foreign debt to pay for consumers' hunger for imports.
The deficit in the last three months of 2004 totalled an estimated 7.1 per cent of gross domestic product, far larger than that which prompted the warning by the then treasurer, Paul Keating, in 1986 of Australia becoming a "banana republic".
And if not for very favourable trade prices, the deficit would have been far higher than $15.2 billion.
The shortfall is one item in a trifecta of economic and political headaches for the Government. (from The Sydney Morning Herald)

Australia seems to be at an interesting monetary crossroads. On one hand their economy is slowing but on the other they have a perceived real estate bubble and strong consumption based on borrowing.

I thought last year that Australia's economy would slow as the result of rate hikes and that rate cuts and currency weakness would be the outcome. I would still rather sell the AUD than own it but I guess it will be the economic weakening that brings the currency down rather than rate cuts. I also wonder if they will see a knock on effect from any U.S. problems just because of similar current account structure.

Australia Hikes Rates

Bloomberg:

Australia's central bank raised interest rates for the first time in 15 months to curb inflation. The currency fell after a report showing the economy barely grew last quarter increased speculation rates won't be raised again this year.

Gross domestic product in the three months ended Dec. 31 rose just 0.1 percent, the slowest growth in four years, the Australian Bureau of Statistics said in Sydney today. The Reserve Bank of Australia's board, led by Governor Ian Macfarlane, increased the overnight cash rate target a quarter percentage point to 5.5 percent.

Heavy Semi Caps

Kla-Tencor (KLAC) and Applied Materials (AMAT) look poised to turn lower here. That will probably turn the SOX and the market as a whole.

After the semi upgrade this AM, a second firm took down '06 numbers on the semi equipment stocks setting up an interesting competition.

Semi Upgrade will Test Selling Pressure

I mentioned the semis last night for being in relatively neutral ground. This mornings uprgrade by JPM should give them a good open but I am not sure it jump starts the next leg of a rally in the sector. If that sector reverses it will lead the market down.

If you are interested in steel prices you can read this follow up on last weeks news. My guess is these stories are setting the sector up for a bit of heartbreak when a buyer manages to negotiate a better contract but we shall see.

Monday Night Charting

I was struck going through charts tonight that the day was much worse than it felt. The best charts are still energy and commodities which are showing euphoric strength that is difficult to take advantage of. The semiconductors have bounced into an ambiguous level and could possibly go higher but that does not give me much faith. And lots of stock stood out as just plain ugly. Most notably some big stocks look horrible. Microsoft (MSFT) and General Motors (GM) are the worst but they were not alone.

Many stocks saw volume increase with the today's drop. That seems noteworthy for a Monday. Maybe it was month end and the biotech carnage but some big red bars showed up in a lot of stocks.

I included the following stocks as two big dogs that look short-term negative but are in longer uptrends. Stocks like this need to turn higher and do the lifting if the market is going to rally.

Click on the chart to see a larger image!


Posted by Hello
After today I would say last weeks lows seem like an easy target. I still expect vols to pick up and am surprised they have managed to stay near their lows.