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A CURRENT UP-DATE
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June 21, 2010
The DOW 30 closed under the 11,000 level for 31 trading days I have been watching, writing or researching the markets for 30 years and I can honestly say there has never been any time in those years that so much is in the news, all at once. The old saying that news moves the markets is quite true, but with so much going on both ways, positive & negative, the markets are moving both ways. Currently we have to worry about BP turning our oceans into oil fields, while shoving the blame on anyone, or anything, it can get away with. We have to worry about a very inexperienced President having trouble finding a way to put people back to work. We have to worry about this same inexperienced President that favors handing out billions of dollars to big banks and Wall Street powerhouses, in stead of trickling down to the bottom of the fish bowl. We have to worry about the "American Dream", the one that taught us owning a house was a safe investment and one all should be part of, only to discover that our fearless leaders allowed the banks to take control and get out of control. This "dream" is truly gone for many Americans that truly believed in home ownership. The housing market is a power house for the U.S. economy and as this power house comes apart it cost the country jobs in almost all walks of life. The U.S. economy cannot recover without the housing industry and putting people back to work, and this is where the problem lies. The economic recovery we have experienced, of late, might just be a lion in sheep's wool. We are hearing much more talk of the increasing possibility of a "double dip" recession lately and talk is where it starts before becoming real. A recent report shows the jobs market is starting to lose more jobs again. Another report is telling us inflation is still tame and little reason to believe it will all of a sudden start climbing. If Americans are out of work it would be impossible to push higher prices on them. It's sort of nice to have something we don't have to worry about. The financial breakdown in Europe is serious and will not be gone in a few weeks, or even months. The repercussions will be felt world-wide and any problems that are big enough to possibly jeopardize an entire currency, such as the euro, is everyone's problem. Since I am a technician first and a fundamentalist second, the thought of all the major indices hanging around correction territory is keeping me awake at night. This is my greatest concern for the current markets. Long term we probably have little to worry about, since 80% of all Americans still have jobs. One problem though is many corporations have learned to live with fewer workers by cutting cost and this will remain a strategy and one of the downfalls will be that jobs gone may be gone forever. The OK part is most of the indices have climbed back to under a 10% discount to the 52 week high, the definition of a correction, by the close today, but not that much and the markets are fighting to keep the recently gained ground. This is a worry and the longer it takes for the markets to get back up the easier it will be for them to go back down.A week ago the S&P 500 (^ SPX) closed below the 200-day MA (1,102) for the first time in 216 trading days. This is bad news, especially since there was hardly any resistance. Once below the 200-day MA, the S&P fell another 3% in one day.To make matters worse, the S&P attempted to break above the 200-day MA four times before finally making it over the 200 day MA but appears to be heading back down again. The Nasdaq (^IXIC), also fell under the 200 day MA. The Nasdaq has been one of our strongest indices in the recovery, As far as the SPREAD, the correction now is already further than the 7.5% it corrected the last time the markets sold off, This time it has backed off more than 12% from the 52 week high. The only indices with less than a 10% correction last week were the the DJI, DJU & XMI, all very narrow indices, meaning they cover very few stocks in total. As of Monday, three of the indices have returned to more than a 10% loss to the 52 week high. They are the SPREAD, RUT & VL, all indices that cater to the big OTC stocks. So far the SPREAD has not closed under the 200 day MA (1644.69). It came close on 6/8/10, closing at 1661.92, but has moved back up a bit since, closing today at 1769.78. The SPREAD is a leading indicator and I watch it often. The markets should follow the SPREAD since it covers so many of the big blue chip stocks and also the big OTC stocks. The next few weeks are critical for a techniction, as the markets attempt to recover, a natural occurrence after a big sell off, with no idea of how strong this rally will be. If it runs out of steam early, which it appears to be doing, it would be a bearish sign and we might look to the indices to fall back under the 10% discount level again. I am also worried that we could see a fall to under the 20% discount to the 52 week high, the definition of a "bear market". There are enough screwball things going on in the world to easily turn the economy back down. The Feds are no longer giving credit to home buyers, and the housing industry is feeling the pinch and this in turn will cause job losses and this in turn will contribute to slowing the recovery and this will result in job losses. Get the picture. A rose is always a rose, even if we call it by another name, but calling the economy a rose does not make it a rose. Yes, some economist see a better picture ahead, I am sure they are in the minority, and most politicians see the same thing, but they have no idea what they are looking at anyway. Most economist are telling us there is trouble in them thar hills. I guess I am trying to make a point by driving it into the ground, but the point is - we have to be cautious. If the recovery is in track, and we do not buy the corrections, we will leave big money on the table. If the recovery is a lion in sheep's clothing, then we surly want to wait for the real bargain. This is a big problem for me. Most of the stocks I like are a bit too high to buy, even after the recent backing. I like Intel Corp. (INTC), but not at the close today of 21.21. I like Tetra Tek, Inc, (TTEK), but not at 21.79, today's close. I like AMD a bunch, but not at $8.91, the current price. The list goes on, but I am wanting to wait for lower ground ahead on the entire batch. Call me a coward, but this could very well be a tough fall season, meaning the road to the fall will be quite bumpy. Since I believe there is always a good bet, I want to say we should stick to start-up companies, companies with new ideas, smaller companies with things happening. I have several reasons for wanting to stay in the small company world. A new company usually has everything to gain and little to lose in the early stages. Those with money, ideas, needed products, or all of the above combined. Normally a newer company has smaller debt and most raise capital from selling shares and not borrowing. It takes less total dollars to support a small stock than a big one and the smaller investor is more apt to buy the future than the now. I just feel this is the best place to be for the next several months. If we can get a big enough sell off then we can look at some of the bigger stocks once they become better bargains. Its a "darned if you do, darned if you don't" market. We have to be in the market, since it will far out pace any other kind of investment. If we think about it, housing sure has not moved up 100%, as many stocks have. Money markets are paying out so little we almost feel like we have to pay to have one. Investing in stocks at a time of an economic recovery, or even an attempted recovery, may be the best place to be. Its all in the timing. I'm betting that gold will continue to climb, although at a slower pace than we have become used to. Still a good place to be but buying the mining companies may be less risky and the best way to own the metals at the current high prices. I'm betting that the euro will continue to fall, as we discover that Greece is not the only euro country in trouble. This in turn will help the dollar gain when in fact, with U.S. debt growing at an alarming rate, it should be weaker. This can become a problem with inflation on down the road. It is also making our exports more costly at a time when we need to manufacture and sell anything we can. Look for something new, different, or both, that has not yet accumulated any skeletons in the closet, buy it and set back and wait. Buy A LOW PRICED MINING COMPANY WORTH A CLOSER LOOK
A "Buy Here, Buy Now" "Spotlight Stock" Jet Gold Corp. (JAU.V) (Canadian)(Pink Sheets
JAUGF) (52
week range 0.06 - 0.16), now at ¢0.05. Jet
Gold is an exploration and development company with interest in natural gas, oil & precious metals. ADVANCED MICRO DEVICES ***** "Buy Under $7.68" Advanced Micro Devices (AMD) (52 week range 3.22 - 10.24, now at $8.88. AMD moved from the low of $1.62 on 11/25/08, about 1 1/2 years ago, to
a new 52 week high of $10.24 on 4/15/10. AMD recently won a $1.25 billion settlement from Intel. The stock is moving
up, or down, with the ,markets. My concern lately is the stock has trouble climbing back over the $9 level, what's more the $10 level seems to be out of reach. Recently the stock hot my buy are of under $7.68, but the recovery, although a quick buck, leaves much to be desired. The action on the stock is equal to the disenchantment in the bull we have seen recently. Although I like the stock for the long term I feel waiting for something under $7.68 will happen again and maybe a bit lower. EXTERRA ENERGY "Moving Now" Exterra Energy, INC. (EENI) (52 week range 0.05 - 6.00), now at $1.82. Exterra Energy
became public via a merger in October/07 and started trading, as a public company, in January/08. Exterra Energy could be a great short term play. Increasing daily volume means higher ground ahead. There
is still reason to pick up shares in Exterra Energy..
A "Watch Close" "Spotlight Stock" Fonar Corp.
(FONR) (52
week range 0.92 - 4.60), now at $1.70. I first started following Fonar in 1982 and have followed it every day
since. The stock is very liquid, as it trades strong volume daily. Great products would be the reason to own this
stock, but play it short-term only. The stock price jumped a few months ago to a new 52 week high of $4.60 and right back down. It jumped again several weeks ago and right back down again. It truly is the nature of this beast. Two newsletters announced a buy on Fonar and the stock screamed in a day. Too fast of a move. The stock has eased back since and has even touched the $1.50 level a couple of times. One concern is the average daily volume in the last 10 days is just under 11,000, while the average for the last three months is 145,000. Lower volume means lower ground ahead. A stock to own, if at the right price, in any market. Wait for something under $1.50! Remember, if in the right stock, at the right price, the market direction will mean little! I am J.R. Budke and this is my opinion!
J.R. Budke became a stock broker in 1981, an options principle
since 1982 and a branch office manager since 1987. He is currently inactive as a stockbroker as of 12/31/99. J.R.
writes the articles and opinions for the Stocks in the Spotlight. The
stories and stocks found on this site, or any "Stocks in the Spotlight" written material, are the opinions
of J.R. Budke unless other wise stated, and should not be considered as advice. You should not purchase any stocks solely on the opinions found on the "Stocks in
the Spotlight's" web site or in any of its written material. You should also be aware that options are not
for everybody and carry a high degree of risk. |
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