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Fears Over The Economy Hit Wall Street

I’ve been saying for some time that the strength on Wall Street is only temporary. With the political game that Washington has been playing, our economy has not yet started to recover or in some cases, hold on to their current levels. The debt ceiling has been an issue for months and in the eleventh hour Congress finally gets their act together to pass an extension. What’s good about an extension for the long term? Nothing.

Standard & Poors along with Fitch and Moody’s are concerned about the true condition of America’s deficit and the ability to function within a budget. It’s been over 800 days since Congress has passed a budget and that’s because they’ve been spending money and if they had a budget in place, they wouldn’t be able to do as they’re doing for the last few years.

As you can see on Wall Street, investors are moving their money out of equities and moving them to saver havens like bonds, precious metals and in some cases, overseas. The DOW lost 266 points earlier this week and claimed back only 30 point the next day. As of this morning at 10:45am, the DOW is down another 208 points and who knows where it’s going to close at the bell. Since Monday morning the DOW has lost nearly 5%.

As for the NASDAQ, it too has taken a hit during this week thanks to the uncertainty of the actions going on in the Beltway. NASDAQ is down (so far) this week over 5% along with the S&P 500 dropping 6% during the same period. A sign of things to come in the near (and possibly long term) future.

Do what they smart money has been doing for quite some time and that is buying gold, silver and other precious metals. Gold has gained 10% since June and 4% in just the last few days. How can you sit by and watch as others, who have a better idea of the markets, as they move assets to other sectors to hedge against the inevitable pullback on Wall Street? I suggest you really look at your portfolio to see how diversified you are and make the appropriate moves to balance it. Remember to not put more than 20% into any one sector or individual stock. Doing so may cause you to lose more than you would have if you diversified.

As for me, I’ve moved out of most of my positions in equities. I’ve been building up positions in the commodity sector, mainly gold and silver, to get ahead of the currency issue plaguing our country as well as the world. You might want to do the same.

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What’s Happening On Wall Street.

US Stock Market Report for the Period July 25 – August 1, 2011
Over the last week, the continuing debt discussions have had a major impact not only on US stocks, but also at the international level as well. Stock markets activities were cautious at best as the world waited on a debt deal to be finalized. The month ended with news that a deal had been reached which resulted in stocks rising in the US and international markets. The immediate increases following the deal were tempered by cautious selling as the full impact of the deal is not yet known.

At the start of business on August 1, traders were cautiously optimistic. Figures for the main markets started higher than Friday, but began showing slight decreases later in the day. The Dow Jones Industrial average was down to 12,063.77, a fall of 79.47 points, while Standard & Poor dropped 10.70 points to 1,281.58. The Nasdaq also fell a bit by 16.75 points to 2,739.63.
The week of August 1 to 6 will no doubt be an important one as it relates to the global as well as US stock market. This period will see the real reaction to the debt deal as markets adjust to the perceived impact for the immediate future. By the end of the week hopefully the Senate and the House of Representatives would have signed off on the package.

Impact of GDP on Stock Market Performance
As if the threat of the US losing its triple A rating was not enough, the stock market also took a hit due to poor GDP (gross domestic product) data. The projected increase for the 2nd quarter was a modest 1.6 percent, but in actuality there was only a 1.3 percent increase according to figures from the Commerce Department. This modest figure has dampened projections since GDP is used to track economic growth.

Moody’s Reports Cash Hoarding
There have been reports of cash hoarding among some companies in response to the instability in the market. Moody’s has revealed that between 2009 to the end of 2010, there was an 11 percent increase in cash held by companies. The report indicates that as much as $1.24 trillion dollars is being held. Over a half of this money is invested or banked in foreign countries to be used for various purposes.
Senior vice president of Moody’s, Steve Oman stated that among the reasons for these holdings are investments in operations the companies have overseas, acquiring overseas interest and to benefit from overseas tax breaks, which they then repatriate to the US. Overall, the combination of the poor GDP figures and the debt ceiling crisis has placed the US stock market in the worst position it has been in for over a year.

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Stock Market – 1st Week of July 2011

The week ending July 1, saw the US stock market showing its best performance over the last two years. In fact, the DOW rose to a fairly decent 648 points. The showing for last week was partly attributed to steps by Greece to deal with the country’s financial crisis. Some industry experts also believe that the slight flickers of hope from the US manufacturing sector also helped. So far, this week seems to be maintaining the momentum, with reports that the DOW Jones and S&P have had a 5-day winning streak.

The DOW overcame slight hiccups earlier in the week to end on a rising note, registering 12,626.02 or a 56.12 point rise at the end of trading on Wednesday, July 6. There were increases on the other main indicators as well, with the Nasdaq rising by 8.25 points moving to 2, 834.02 and the S&P advancing by 1.34 to 1,339.22.
The weak service sector job market is partially responsible for the slower market this week. Interestingly, while showing slower than anticipated job growth, the service sector also registered 19 straight months of job growth in the sector.

US Stock Futures Continue to Fall
The activity of the leading international markets continues to have a negative impact on US stock market futures. The downgrading of Portugal’s debt rating to ‘junk status’ by Moody’s lead to lower European stock markets. The continuing financial tremors in Europe are having a less than desirable effect on other stock markets globally. The downgrading of Portugal’s debt rating resulted in Asian markets closing the day with mixed trading.

With China set to increase its interest rates by a quarter point there will be a negative impact on the market. There are expectations that the hike which is due to the country’s high inflation rate, is expected to happen by the end of the week at least.

With trading taking a day off due to the 4th of July celebrations, the reduced activities also helped to lower the stock market futures. Reports indicate that the DOW Industrial Average futures dropped 54 points, the Nasdaq 100 was down by 8.75 points and Standard & Poor’s 500 also fell 8 points. Investors the world over are being cautious as they watch to see what will happen in the Eurozone as well as in China.

Slowing Stock Market Derailing Takeovers
The continuing snail’s pace of activity in the global stock market is negatively impacting takeovers. Between May and the end of June 2011, there was a 22 percent fall in the value of takeovers according to Bloomberg.

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Another Wild Ride On Wall Street

The day started like any other recent trading this month. The DOW opened flat and from there went on a slide which brought it down 116 points within the first ninety minutes of trading. The confidence in the economy has really put a lot of pressure on the strength of wall street. The DOW is heading for another losing week (7 out of the last 8). I not surprised since the economic data isn’t really looking so bright.

The S&P 500 is down 8% since it’s recent high even with all the bad news coming out. Today the S&P 500 is looking at a possible third day in a row for loses. It has shown to be able to hold on to some sort of strength through it all. Typically I would be getting ready for a decent rally in the markets, but this time I’m not too sure.

What about NASDAQ? well there have been quite a few disappointing numbers coming out from the tech sector, including Micron Technology Inc. (NASDAQ:MU) who has posted it’s less-than-expected quarter results. The street was expecting to see $0.16 on sales of $2.36 billion, but Micron has a $0.07 per share on $2.14 billion. Because of the poor performance, Micron Technology is down 13% for the day so far. What about Oracle? Oracle Corp. (NASDAQ:ORCL) even with it’s better than expected quarter, they are down over 4% for the day. Many analyst were expecting the technology sector to lead the markets out of the latest pullback, but it doesn’t look like it will be the case.

The gold and silver trading prices have fallen in the last two days because a stronger dollar, as well as the dollar being stronger against the Euro. Crude oil prices for today again dropped after oil took a nose dive yesterday after the news came out the there the International Energy Agency (IEU) would be releasing 60 million barrels of oil. Half of which is actually coming from the the strategical reserve of the United States.
My thoughts behind this move is that it’s a political/economic one to help the economy stay some what afloat. Seeing that oil prices is important when dealing with the economy since it will cause food and other prices to go up as well. We are looking at the beginning of inflation (if not already) and if fuel costs were to go up now, it would happen over night. Considering that in just the last year, when President Obama was asked about releasing some of the strategic reserve, his comment was some where along the way of saying…It would not be in our best interest to do it at this time, if ever.
Commodities prices have fallen across the board which is opposite when oil prices fall. So tell me what you think if you think I need to be corrected.
Be careful and happy trading.

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So Where’s The Recovery?

Wall Street took a beating this week and from what I can see, it will only continue when the stock market opens on Monday. So where’s the recovery?

Let’s look how well the employment numbers looked for the month of May. According to the report, only 54,000 jobs were added to the private sector during the same period. The bad part about that is that for the employment rate to hold steady, it must add 150,000 jobs each month just to keep up with the population growth in the U.S. So obviously, there’s no recovery in the job market.

How about the housing market? Well from what I’ve seen coming out over this past week, it also doesn’t look good at all. In some areas of the United States, home prices have fallen to the levels of 2002. In other areas like Las Vagas, the home prices have fallen to the levels of 1999. Many feel that the average home price will continue to drop for the remainder of this year. So I guess we can rule out that industry for showing signs of recovery.

So why is it that the stock market has been climbing since it’s bottom back in March of 2009. We’ll I feel that there was some companies that had solid fundementals and balanced sheet to continue to grow in the trouble economy. Remember that the indicies really only show the strength of the markets, not necessarily the strength of the economy. Of course many investors and traders were not completely wiped out financially and were willing to keep buying and selling.

How long can this keep up? In my opinion, not for long. Congress isn’t doing what they need to do and the present Administration is spending like a drunken sailor (I know that’s not fair to say about drunken sailors since drunken sailors spend their own money). It was reported this week that if a decision isn’t made to raise the debt ceiling, Moody’s has stated that they will decide on how they are going to re-evaluate America’s credit rating. Figuring that both the democrats and the republicans can not agree on anything, we’re going to lose our current rating and that will send this country into an inflation tailspin.

So if you’re thinking of trading in the stock market, tread carefully and be aware of the day by day issues going on in Washington as well as on Wall Street.

Happy trading.

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Trading Solutions That Can Help

The three indicies lost just over 1% each on Tuesday. The DOW slipped 96.50 points to close at 9241.45, the S&P 500 shed 12.75 dropping below 1000, and the NASDAQ finished the day at 1969.73 after losing 22.51 points. There were some great gains in some stocks even with the down day.
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The financial sector was the worst of the bunch today. I’m glad that I’ve pulled out of that sector a couple of days ago. I’ll wait for a healthy pull-back and jump in again.
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When I sit on the sidelines waiting to jump back in, I sometimes use the time to try some investing programs I’ve come across.
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One that I recently checked out is the free analysis trading software package from Trading Solutions. It can learn patterns from historical data and allows you to create trading systems that suggest when to buy and sell. The software works with stocks, futures, currencies (FOREX) and many other financial instruments.
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Download Trading Solutions and try it for free. Let me know what you think. As I continue playing around with it, I’ll report back on how I like it.


TradingSolutions

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The Dow At 9000, Where Do We Go From Here?

Who would have thought that this could have happened so soon? Either way, it was reached. The DOW close above 9000 (9069.29 to be exact). The S&P 500 has been on a tear, closing at 976.29. Lets not forget that the NASDAQ is now at 1973.60. The past two weeks of trading have been great for the markets.
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With that being said, what are we to expect in the coming weeks? If you’ve been listening to the talk on the street, you’ve heard both sides of the possibilities. “It’s only going to get higher” or “the markets are going to correct themselves”. Those are the only two choices.
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After listening to all the opinions that where flying today, I would have to agree that the markets are due for a correction. How can it not? I don’t know about you, but I don’t really see a reason to be all optimistic about the stock market. Add on to the fact that many traders and investors have made a lot of money in the last four months. There will be some profit taking very soon.
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With all the talk about health care and the Cap and Trade bill, if these two bills pass, corporations are going to find it hard to keep making the earnings that the investors want to see. The taxes that will be imposed onto these industries are going to break them as well as the country’s GDP.
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In the last few months I’ve made some great gains in the markets and I’m not willing to give them back anytime soon. At this time I’m sitting more than half my portfolio on the sidelines, while I wait for the other shoe to drop (and it will). Don’t get me wrong, I do believe that there will be some gains to be made in many other sectors and that’s why I’m watching the tech sector. They (tech sector) don’t have the government issues to deal with, like most of the others ones.
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Which ever way you plan on playing the markets in the coming weeks, do your due diligence.

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Research In Motion (NASDAQ:RIMM)

Yesterday I spoke about building a position in Research In Motion (NASDAQ:RIMM). My first buy-in was at $76.25 when the price dropped. Share price opened this morning at $77.86 and within the first five minutes of trading, it was up to $78.40. Unfortunately that was as high as it would go. Minutes later it fell to $76.13, where it would continue to bounce within that range.

Research In Motion was scheduled to release their first quarter earnings report after the closing bell today. I was looking for some more upward motion from other traders getting on board in expectation of RIMM beating the street.

Shortly after the bell, RIMM released their report. RIMM earned $1.12 per share for the first quarter on revenue of $3.42 billion, compared with $482.5 million or 84 cents on revenue of $2.24 billion a year earlier. Included in the results were non-recurring items. $96.4 million relating to certain employee tax liabilities along with a gain of 175.1 million primarily as a result of the enactment of functional currency tax rules. While the analysts were only expecting $0.94 on revenue of $3.43 billion, RIMM earned $0.98 per share.

What I didn’t expect was after the company beating expectation by $0.04, the stock dropped more than 6% in after market trading. By the time after hour trading was done, the stock moved back up to $76.06, just off by 0.5% from where it closed at 4:00pm today.

One thing that I wish I was able to do was to buy more shares when it fell to $73 shortly after the release. In April, Rimm beat expectation by 7% and since then the stock price has moved up 55%. Today they beat it by more than 4% and it moved no where today. Many investors and traders were looking for more and the knee-jerk reaction was to sell. The more they were looking for was in RIMM’s second quarter guidance. RIMM”S range for earning in the next quarter is $0.94 to $1.03 per share on revenue of $3.45-$3.70 billion. The mean analyst estimate is for 97 cents on revenue of $3.61 billion. After the conference call, I guess people realized it wasn’t as bad as it originally sounded.

With the information I have on this company, I believe that RIMM is still fundamentlly sound and will continue to grow. I will continue to buy into RIMM under $80, after that I will sit back and watch the gains from this great company with a fantastic product. The BlackBerry is a great smartphone with many different applications to do the things you want to do. As a matter of fact RIMM just released their latest BlackBerry model, the Tour, earlier this week.

Jim Cramer doesn’t call this company one of the four horseman of the tech sector for nothing.

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Another Day In The Stock Market

With the economy the way it is right now along with the volatility in the stock market, If you have the ability to trade stocks on a daily basis (day trader) or even holding for a day or so, you can make some money without really trying.
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You will still have to do your homework and research on the companies that you want to invest in, but if you have a list of stocks that you’re very familiar with, playing the volatility is quite profitable.
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Yesterday I spoke about building position in the companies that you want to invest in. When the markets were at their lows, I started to do so. I actually picked up some at good prices, even though I would have like them to come down some more. I told you in the past to buy in increments, not all at once. If the price did continue to fall yesterday, I would have bought more later on.
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I bought Apple (NASDAQ:AAPL) @ $134.75, Joy Global (NASDAQ:JOYG) @ $34, Research In Motion (NASDAQ:RIMM) @ $76.25 and last, but not least, Sirius Satellite Radio (NASDAQ:SIRI) @ $0.325. I expected prices to bounce back up yesterday as well as a little bit more of a gain today. I was right only three of the four trades I did. This morning I waited for the opening to see what I was going to sell. At the opening bell, Sirius was up to $0.43 per share and after the negative news about their downgrade, I expected it to drop down below $0.40. I put in a limit sell order for $0.425 and it sold shortly afterward. A gain of 30% over night. To be honest I was planning to hold on the Sirius for the long term (until their next earnings report ), but when I was up that much, I sold it and will continue on the next dip.
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As for Apple, I was also able to sell my shares at $138, for a gain of 2.5%. I know that isn’t much to boast about, but if you think that you can’t even get that on a basic 12 month CD these days. Take into consideration that I did buy large amounts of share that help offset the fees that were charged to me. Joy Global was the last on I sold this morning. I sold it at $36.50 per share, for another gain of 7.3%.
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As for RIMM, I didn’t get the action I wanted, but that’s OK since I do expect that to run into the $100 range in the coming months. I will continue to hold on to the share and add to my position.
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You need to take advantage of the opportunities when they present themselves, so if you are able to trade on a daily basis, good luck.

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The Stock Market Is Getting Ready For Another Run ...

Here we are again going through another correction in the markets. The three indicies have dropped over the past week off their seven month high and I’m not surprised. Over the last three months the markets have been on a tear coming off their lows. I mentioned before about how the markets wouldn’t be able to continue these gains without some sort of correction and profit taking.
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Even though I’ve been waiting for this pull back for some time, I did expect it. I will say that the markets aren’t as weak as I thought. I no longer expect to see the DOW reach 7000 again. As a matter of fact I don’t think it will get below 7800.
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The word on the street is that there is a large amount of money sitting on the sidelines waiting to jump back in, which means that once investors and traders feel that the waters a safe enough to come back in, it will help the markets rebound even more. Yesterday I heard that many of the hedge fund managers are already invested in and that they don’t have much capital not isn’t in the markets. The report stated that they are concerned that they may miss the next surge in the markets and they don’t want to be caught sitting it out.
If that’s the case, it can also be said that if they get skittish and pull their money out to avoid another big loss, we will see the 7800 level on the DOW.
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I don’t think so on the latter issue because the housing market is showing signs of stabilization, as well as the financial sector. Jim Cramer last night even had a segment in regards to the housing bottom. Since last August he has been saying that the housing bottom would be around June 30th of this year. Well, he ripped the board down and said that after yesterday’s housing number were the third straight month that they have improved. Other indicators are looking good too.
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With that in mind, I will start building positions in the stocks that I’ve been watching for sometime. Over the next two weeks, I will be looking at Apple, JP Morgan, Research In Motion and Agnico Eagle Mines. Of course there are others that I do like, but I would want more of a pull back before jumping on board with them.
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If you’re looking to take advantage of some free advice from Jim Cramer (besides his TV show), Check out his Action Alerts program that he’s always mentioning on his show. I’ve been a member for over a year and find some sound information from him, along with some great picks. Follow the link for a two week free trial of his Action Alerts subscription.
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