Saturday, January 30, 2010

Politicians tank the market again

I like to analyze the market by using a combination of fundamental and technical analysis. Normally using that combination keeps me on the right side of the market. Lately the market seems to act irrationally every time a President or other politician opens their mouths. Somewhere back in a high school civics class I thought I remembered a teacher saying the purpose of government was to make and enforce laws and provide the common services that public and private companies couldn't provide.

These days the main purpose of the government seems to be to control the capital and equity markets, lower your taxes by limiting your bonuses, spend money they don't have on stimulus packages that don't create new jobs ( which increases the deficit) and scare the heck out of the stock market whenever it seems things are going great.

So far the scoreboard for the middle class is you are either unemployed or taking home less money because you've lost your bonus, the balance on your 401K or IRA is half of what it was 2 years ago, your house is underwater because the value is down but the mortgage balance isn't and if you need a loan to tide your small business over till the recession ends no bank will loan you money.

Yes Obama has made good on his promise to lower the tax bill of the middle class but he forgot to tell us he would do it by lowering the numbers on your W-2.

Well it's the weekend again and time to take a look on what the market did. As usual I go to Barchart for my data and I look at the Value Line Index because it is contains 1700 stocks and is broader than the narrower S&P 500 or Dow 30.

Value Line Index -- 1700 stocks -- down 2.3 % for the week. That makes us down 3 weeks in a row and down for the month by 2.89%. Remember we were up in November by 3.74% and December up by 7.01%. Is that a correction or change of direction?
  • The Index closed below it's 20 & 50 day moving average but still managed to trade above its 100 DMA
  • Barchart's technical indicators gives the Index a 24% sell signal with 4 buys, 2 holds and 7 sells

Barchart market momentum -- approximately 6000 stocks -- the percentage of stocks trading above their daily moving averages for various time periods --short term reversal but still up for the long term

  • 20 DMA -- only 23.87% above
  • 50DMA -- only 43.56% above
  • 100 DMA -- 51.43% above

Ratio of stocks hitting new highs to stocks hitting new lows for various time frames -- 1.0+ bullish, 1.0 neutral, under .99 bearish -- looks bad for all 3 time frames

  • 20 day new high/new low ratio -- 382/2092 = .18
  • 65 day new high/new low ratio -- 211/516 = .41
  • 100 day new high/new low ratio -- 148/374 = .48

Strategy for the next week -- The economy according to the Conference Board's Leading Economic Indicators seems to be mending, fundamentals of the companies that made it through the recession seem to be improving but the market is showing signs of nervousness from the political instability that Washington is creating. I'm going to sit on the side lines and trim a few non-performing stocks this week but not replace them till I see more support in the market.

I'm taking the week off and going down to the Money Show in Orlando to hear what the big boys are saying. The list of speakers is impressive: Steve Forbes, Howard Gold, Jim Jubak and two of my all time favorites Paul Kangas and Robert Stovall. There will be educational seminars by Jamie Dlugosch, Kelly Wright, Tobin Smith and Louis Navellier I'm really looking forward to talking to Jim Rohrback, Ken Kam, Michael Shulman, Nicholas Vardy and the always entertaining Jon Markman. If this sounds like a commercial, it's totally unsolicited. I've attended and spoke at 3 of these and really enjoyed each time. See you there.

Well, I've put off the bad news till last. My Wall Street Survivor portfolio is in the toilet. The S&P 500 was down 3.72% for the month but I'm down 7.09% mainly because I'm margined out. Hats off to Anthony Mirhaydari for calling the market sentiment properly and being up 3.72% while I came in 8th place out of 8.

See you at the Money Show.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Thursday, January 28, 2010

Hang up on Motorola

Motorola (MOT) continues to disappoint. Now they are finally selling their cell phone business. Time for you to get out of Dodge too.

My points:
  • Price decrease in 8 of the last 20 trading sessions
  • Price loss of 18.07% in a month
  • Barchart has 13 of 13 technical indicators signaling see
  • Analysts predict 5 year compounded EPS loss of 4.55%

Sell of short immediately

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Disclosure: no positions at the time of publication

Departing the Depot

Office Depot (ODP) is being cut for my Marketocracy S&P 500 portfolio. I've got some rules that I follow religiously and ODP violates them all. Very simply put my investments must meet some basic criteria:
  • They must have current price appreciation in recent trading sessions
  • Barchart's technical indicators must show a positive buy consensus
  • The stock must be trading above it's 20, 50 and 100 day moving average
  • The analysts should have a consensus of increasing sales and earnings projected for the future

Well how do the criteria stack up?

  • In the last month the stock has closed lower 8 times and lost 20.76%
  • Barchart's technical indicators have 12 of 13 sell signals
  • The stock is trading below it's 20, 50 and 100 day moving average
  • Analysts predict lower sales, operating profit and net earning for next year
  • The nail in the coffin -- Analysts consensus is a 5 year compounded EPS loss of -24.9%

Recommendation - Despite some other sites having a hold recommendation I'm dropping ODP like a hot potato. They are too many companies out there making money for me to invest in a wing and a prayer.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Disclosure: no positions at the time of publication

I'm on hold today

I just ran an hourly chart on the Value line Index - an arithmetic index of 1700 stock followed by Value Line. The index shows trading below its 20, 50 and 100 hourly moving averages.

The index is trading at 2235.80 with resistance at 2267.55 and support at 2214.83.

My advice is to trim stocks trading below their 50 day moving averages but I'd not replace them until I see some support in the market.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Tuesday, January 26, 2010

Sitting out right now

This is just a quick note to tell you that I'm sitting on the sidelines right now until after I see how the market reacts on Thursday to the State of the Union address Wednesday evening. I've learned in the last few years how I can be lulled into a trance because I see market and economic signs that are either positive or negative, so I place my bet on that direction. Then someone opens their mouth on TV or at a press conference and I have months of gains wiped out in an instant. Long trades tank or short positions need to be covered because of a short term media generated blip. I'm not blaming Obama on this; it just happens. Press conferences by Bush, Greenspan, Obama and Bernanke have all caused me to take a hit. I blame no one but other panicky investors.

I do believe that in the long run, the only thing that counts is earnings. My accounting background makes me a fundamentalist at heart. Companies with increasing earnings eventually go up and companies with increasing losses eventually go down. It's that in between time that bothers me. The real numbers and the perceived numbers sometimes have a disconnect and it's during that period of disconnect that people get hurt.

My decision to procrastinate is a decision. I am cutting Factset Research (FDS) from my Wall Street Survivor portfolio. They seem to be having just that disconnect I'm talking about and I don't know why. Although the numbers and press look good the stock is taking a hit so I'm out. I'll think about replacing the funds but not before I see how the market reacts to the State of the Union address.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Disclosure: No positions in FDS at the time of publication