Jobless Claims, McDonald's, Goldman Sachs In Focus
Under the Radar Newsletter
Jeff Stone
· The number of initial claims for regular state unemployment insurance benefits fell 27,000 to 451,000, seasonally adjusted, in the week ended Sept.4, the Labor Department reported. · Fast-food giant McDonald's Corp. said its global comparable sales, or sales atall restaurants in operation for at least 13 months, rose 4.9% in August, matching the consensus forecast. · The U.K.'s Financial Services Authority said it has fined Goldman Sachs GroupInc. 17.5 million pounds ($27 million) for failing to disclose a U.S. fraudprobe that encompassed the firm's U.K. operations.
Pushing On A String
Schaeffer's Daily Bulletin
Bernie Schaeffer
The Federal Reserve's recent decision to buy more Treasury bonds does not signal the U.S. central bank is on the verge of another round of easing, a top Fed official said on Wednesday. Dallas Federal Reserve Bank President Richard Fisher expressed skepticism about the effectiveness of any further loosening of monetary conditions. "The real issue in my opinion now is, are we pushing on a string with accommodation?" he asked. Sentiment Readings: Options trading was brisk on Wednesday, as 6.2 million calls changed handscompared to 4.8 million puts. The total put/call volume ratio came in at 0.76, while the total put/callopen interest ratio came in at 0.76. The International Securities Exchange (ISE) had a put/call volume ratio of 0.73, while the Chicago Board Options Exchange (CBOE) had a put/call volume ratio of 0.79.
Technical View: In Range
Principles of the Stock Market
Richard Schwartz
TECHNICAL VIEW. I see Jeffrey deGraaf, at managing director at ISI Group and rated #1 technical analyst by Institutional Investor for five straight years was skeptical of last week’s rally, at least back a week ago. He said it’s a move not likely to last. His reasons? The primary trend turned negative in July, equities weren’t really oversold, investor sentiment wasn’t extremely bad and trading volume wasn’t what it should be. Schwartz View: Trading volume has fallen back after pretty decent up days last Tuesday & Wednesday. We did have some upside follow through. Wonder what #1 says now? (I see us in a range.)
Technical Picture Brightens
Cabot Market Letter
Michael Cintolo
Just two weeks ago, our headline read, “The Technical Picture Worsens,” as the number of stocks hitting new lows on the NYSE expanded to 171—the secondhighest reading of the year—and multiple indexes plunged through their moving averages on news of weak housing sales. But today that wave of selling pressure looks like it may have been the “fi nal fakeout,” the last move designed to get weak hands to sell their stocks to the savvy buyers waiting in the wings, because now the picture has brightened! First, the intermediate-term moving averages of our Cabot Tides have soared back above their moving averages. Second, the number of new lows on the NYSE has shrunk rapidly to below 20, and that just does not happen in a weak market. And third, the Advance-Decline Line of the NYSE (it used to be one of our primary indicators) has broken out to its highest level of the year!
A Game Changer
Moneyletter
Walter Frank
That was one huge “whew” you heard from Wall Street last week. The exhaling started on Wednesday with the ISM manufacturing survey for August, and then continued right through Friday with the employment report. By the week-end, fears about a double-dip were losing their grip on the imagination of investment professionals. During much of August, to the contrary, those fears were responsible for a tumbling market. The August reports underlined one fundamental fact; economic growth is continuing. Oh, yes, the rate of growth is unsatisfactory considering the state of the economy, par-ticularly unemployment (but factory utilization as well). Still growth it is, on the order of 1.5-2.0% in terms of the whole economy (GDP). The reports also provided evidence that the sources of growth (however fragile) are widening out. Do not underestimate this development.
Shark Biotech Alert - DNDN to $42
Shark Biotech
Dan Rosenblum
DNDN is jumping to the $42 level after Medicare assigned a CPT code for the reimbursement of Provenge. The assignment of the code should put to rest any reimbursement issues for the drug. Also I think there is a chance that some physicians will try to prescribe Provenge off label now that there is a CPT code assigned, although I think probably Medicare will still closely examine each case to make sure that only on label patients will be treated.
September 7, 2010: Stocks Pull Back After Strong Gains
Systems and Forecasts
Marvin Appel
Stocks gave back a fraction of last week’s gains today. The major benchmarks each lost a bit more than 1%, while the small-cap benchmark Russell 2000 Index tumbled 2.2%. Breadth was -1437 on the NYSE and -1406 on the Nasdaq. Last week’s gains pulled our models back overall to neutral-to-positive. This sideways market has confounded trend-following indicators. The course of action I recommend is to project a continued trading range market with limited risk beyond the lows we have already seen. I expect that when the S&P 500 Index does exit the 1020-1100 range, it will be to the upside.
Dollar Weaker; Euro Consolidates Amid Bank Jitters
Under the Radar Newsletter
Jeff Stone
The U.S. dollar weakened versus most major rivals Wednesday as equities turned higher and the euro held its ground amid revived worries about Europe's banking sector. The dollar index, a measure of the greenback against a basket of major currencies, slipped to 82.665, down from 82.897 in North American trade late Tuesday. The euro traded at $1.2695, up from $1.2682.The single currency took a drubbing Tuesday after a report in The Wall Street Journal said European bank stress tests conducted earlier this summer may have significantly understated major banks' exposure to potentially risky government debt. The single currency held a narrow range versus the dollar Wednesday, briefly edging back above $1.2700 after Portugal successfully sold 1.04 billion euros ($1.3 billion)of three- and 10-year bonds. While the government saw its borrowing costs rise significantly from previousauctions of the same securities, reflecting the upward pressure seen on peripheralbond yields, strategists said relatively solid demand helped ease jitters. Ireland, however, continues to bear the brunt of renewed banking worries, with thecost of insuring Irish debt against default rising further into territory unseen sincethe launch of the euro in 1999.
Shark Biotech Alert - ACHN VRTX ONXX
Shark Biotech
Dan Rosenblum
It seems BMY sees promise in Lambda, and I think this bodes well for a small company like ACHN which isentering phase 2 trials with a very promising Hep C drug. Lately several competitors like ANDS and IDIXhave had setbacks and now ZGEN has been taken over. I think the value of ACHN's drug ACH-1625is muchhigher than the current market cap of $150 million would indicate. The company just raised money to getthrough the phase 2 trials so they don’t have to do a partnership now. If the phase 2 trials are a successthe amount they would get from a partnership will be much higher so I am hopeful they do it aftera successful trial. Speaking of Hepatitis C VRTX announced last night successful results from yet another phase 3 trial ofTelaprevir. This one tested patients who didn't respond to traditional therapy. Patients who were treated withTelaprevir showed a 65% cure rate compared with only 15% of those who continued on traditional therapy.I was just telling someone last night that there hasn't been a guaranteed blockbuster drug like Telaprevir inmany years in the drug world which is quite exciting. The only issue is that everyone already knows thiswhich is why the stock is stuck in the $30s for what seems like forever.
Three Day Rally Just Another Oversold Bounce?
Principles of the Stock Market
Richard Schwartz
UPDATE ON THE STOCK MARKET. Was last week’s big three day rally, starting on increased and thus encouraging trading volume, but ending the week on lackluster volume just another oversold bounce? Maybe not, maybe it was the real resumption of last year’s market uptrend as the excited talk was that the US recession and fear of renewed recession was over. But it’s too soon for me to jump on board that train especially since, in spite of the bounce, we are still range bound. As I wrote yesterday, when and if we break above the April highs that will be more definite confirmation to me that the recession is truly behind us. In the meantime I half expect investors’ moods to swing wildly to and fro and stock prices to follow suit. For now, I continue to feel we’re in a bind with no easy way out and that the economic and stock market bounce last year was just that, an automatic bounce after a steep, out of the blue, fall.
Featured Stock: FSYS
Schaeffer's Daily Bulletin
Bernie Schaeffer
FSYS makes alternative fuel components for use in transportation and industrialmarkets. The shares gapped higher in early August after the company reported very strong earnings.Technically, the stock has consolidated since the gap higher. FSYS recently turned up on an internalscreen we run that looks for oversold stocks that are highly rated on our proprietary short-termscorecard. In other words, the stock is ripe for a bounce. The shorts are all over this one, as nearly50% of FSYS' float is sold short. Should the shares begin to bounce, there is plenty of room for acontinued short-covering rally. Analysts have plenty of room for upgrades, as half rate the shares a"hold." Traders should target a move up to 40, with a stop on a move beneath 33.50.
Mini-Panic Among The Bears
Investors Intelligence Advisors Sentiment Survey
John Gray
Strength in the market caused a mini-panic among the bears. They dropped sharply from last week's high with a jump in both the bulls and the corrections. All three readings are close to being even, with the corrections now being the highest. The last time that happened was Jan-29 through Feb-12, around the time the market was making its low. All the averages are still down for the year but sentiment readings are bullish. The bulls moved up to 33.3% from 29.4% last week, that reading was the lowest for them since March last year. They were below the level of the bulls, but now have moved back above. The bears dropped down sharply to 32.2% from 37.7% last week. That reading was the highest since the end of March and was very bullish. The remaining advisors, classified as correction was up to 34.5% from 32.9% the week before. The correction number is now higher than both the bulls and bears. The last time that happened was at the February lows. Advisors often shift from bearish to correction before they are ready to make a bullish commitment and vice versa. The difference between the bulls and bears was +1.1%, climbing from last week's spread of -8.3%.
Best Start To September Since 1997
Mutual Fund Strategist
Holly Hooper-Fournier
Coming off of the worst August for US stocks since 2001, the market sprang back to life last week in the best start to September since 1997. After dropping 140 points on Monday the Dow posted four straight days of gains, including two triple-digit moves. Wall Street digested key economic data about the country’s unemployment level, home sales, consumer confidence and manufacturing, as well as minutes from the Federal Reserve’s August policy-making meeting. While Fed Chief Bernanke & Co. expressed concern about the slowing pace of our economic recovery, the news was offset by better-than-anticipated economic data and short covering. With last week’s rally the market indices we track stand within striking distance of resistance in the form of their August highs. However, over the past 113 years the Dow has lost 1.15% in September, on average, and the loss widens to -2.7% when both August’s return and the year-to-date return through August 31 are negative, as has been the case in 2010. If history serves as our guide, we’ll see lower prices before month’s end.
Buyback Letter Hotline #724 Tuesday September 7, 2010: Sentiment Reading
Buyback Letter
David Fried
Sentiment registered a reading of 144.20 last week – A neutral reading. We are now in the May – October Period (historically the May-October time frame has underperformed the November-April period). Continue to dollar cost average into the various Buyback Letter Portfolios. We are now advising subscribers to invest 100% of your normal contribution