Search results matching tag 'TradeMaster'

Underestimating the American Consumer

IanWyatt — Fri, 13 Nov 2009 17:39:00 GMT

Your Daily Profit

November 13, 2009

*****P/E Ratios

*****Underestimating the American Consumer

*****TradeMaster’s Jason Cimpl

Fellow Investor,

As we came into earnings season, it seemed clear that analysts were far too pessimistic with their estimates for earnings.

Yesterday, Bloomberg reported that 81% of corporations have beaten earnings estimates. That’s the highest percentage since 1993. Bloomberg also reported that the S&P 500 is now trading at 22 times reported earnings. That’s the highest P/E for the S&P 500 since 2002. We might assume from this P/E that stocks are overvalued and due for a correction. But that might be a mistake.

In 2002, stocks made their final bottom following the Internet bubble and 9/11. The S&P broke below 800 twice in 2002 (July and October) and traded down to 806 on February 13, 2003. By the end of 2003, the S&P 500 had rallied to 1,112, a 37.9% gain.

*****Price to earnings ratios are often inflated when stocks are bottoming. In 2002, according to the very nifty P/E indicator at BigCharts.com, the P/E for the S&P 500 ranged between 27 and 42. And even in 2003, the P/E ranged between 26 and 35. It wasn’t until the end of 2004 that we started to see the P/E for the S&P 500 drop below 20.

What does this mean?

It means we shouldn’t read too much into P/E ratios. P/E ratios are lagging indicators. They tell is what earnings were, not necessarily what earnings will be. Right now, investors are saying they see more improvement in earnings ahead.

*****It’s happened to all of us. We accidentally overdraw our checking account while using our bank card, and then we get nailed with a series of overdraft fees. Well, no more.

Bernanke says that banks can no longer allow their customers to overdraw their accounts with debit cards -- and be charged overdraft fees – unless customers opt-in to the program. It may not sound like a big deal, but banks took in nearly $37 billion in overdraft fees in 2008. And even this year, when unemployment has devastated some family budgets, banks may take in $38.5 billion in overdraft fees.

In light of the fact that the Fed and the Treasury have done as much as they can to make it as easy as possible for banks to earn money, this is a surprising move. But it’s a good move. At $35 a pop, overdraft policies look almost predatory.

*****J.C. Penney (NYSE: JCP) reported earnings this morning. Revenues and earnings were lower than last year’s third quarter, but then we expected that. The surprise was that Penney’s raised full year revenue and earnings expectations. An even better earnings report came out at Abercrombie & Fitch (NYSE: ANF). Abercrombie beat estimates by a wide margin, even though same-store sales dropped by what must be one of the biggest margins in retail – 22%.

Again, we must remember that earnings estimates were very low for the third quarter. Companies should beat. And if they don’t, it’s a very bad sign. Still it’s good to see improvement in retail. I still think there could be upside surprises for holiday spending.

*****Now, here’s TradeMaster’s Jason Cimpl with our weekly video analysis of the markets. It’s free. Click here to view it.

Until Monday,

Ian Wyatt Editor
Daily Profit

Markets Reverse Tuesday Losses: LOGM IPO Refreshing

IanWyatt — Wed, 01 Jul 2009 20:51:00 GMT

Normal 0 MicrosoftInternetExplorer4

Your Daily Profit

July 1, 2009

*****Small-cap Update

*****Third Quarter Kicks Off

*****Foreclosures and Bank Profits

*****Prime Mortgages Next?

Fellow Investor,

The markets were up today sloughing off yesterday’s losses. The down closed up 57 points to 8,504. The Nasdaq gained 11 points to close at 1,845 and the S&P 500 gained 4 points to close at 923 after hitting resistance at 932 in morning trading and slowly sliding back down.

The Russell 2000, moved up just under 2% for the day to close at 517. The Russell 2000 represents the 2,027 small cap companies and contains well known companies like 1-800 Flowers.com (Nasdaq:FLWS), BankRate.com (Nasdaq:RATE), and Dominos Pizza (NYSE:DPZ). The Russell 2000 Index is up 50.7% since the market’s nadir on March 9, 2009.

Small-cap gainers were lead by Oshkosh Corporation (NYSE:OSK), up 27% after the Pentagon announced that the firm’s new blast resistant, off-road ground force vehicles were the “clear winners” in a multi-billion dollar competition. Oshkosh won the bid to build 2,244 vehicles for a deal worth $1.06 billion. The company beat out defense industry heavyweights including BAE Systems (LSE:BA.L) and General Dynamics (NYSE:GD).

A very exciting small-cap gainer today was LogMeIn (Nasdaq:LOGM), up 25% on it’s IPO. LogMeIn is an on-demand connectivity specialty service firm whose product allows computer users to access files and services on one of their computers from another computer across the Internet. For example, workers can access files resident on their office computers from home without having to attach to a corporate network or have their files stored on network servers. LogMeIn’s services are primarily directed to small and medium-sized businesses.

Other gainers included Ivanhoe Mines (NYSE:IVN), up 23%; Northeast Bancorp (Nasdaq:NBN), up 23%; and ShengdaTech (Nasdaq:SDTH), up 19% after being upgraded by Roth Capital to a Buy rating from a Hold.

Small-cap decliners were lead by CardioNet (Nasdaq:BEAT), down 41% on news that the company slashed its profit and revenue outlook for 2009. The Pennsylvania-based maker of wireless heart-monitoring devices revised its profits to a range of 30 cents to 35 cents from earlier forecasts of 69 cents to 73 cents. Investors punished the company by unloading shares started right the open and continuing through the day. Shares tumbled to $9.57 from Tuesday’s close of $16.32.

Rounding out the small-cap decliners were Repros Therapeutics (Nasdaq:RPRX), down 31% after being downgraded by Wedbush Morgan and Ladenburg Thalmann; Spartan Motors (Nasdaq:SPAR), down 27%, and Immersion Corporation (Nasdaq:IMMR), down 23%.

*****The Third Quarter is getting off to a rousing start. Economic data for the day is generally good – manufacturing shrunk less than expected and pending home sales rose more than expected. As of this writing (12:40 P.M. Eastern) the Dow is up 1.25%. Traders seem willing to forgive the larger than expected drop in private sector payrolls.

We’ll see how long that forgiving attitude lasts...

Earnings season is right around the corner. It seems that expectations are pretty low. I’ve read a few commentaries that suggest that estimates are low enough that companies should be able to meet them. Of course, what corporate America has to say about the future will be important.

Of course, I’ll be watching the banks closely.

*****A lot has gone right for the banks lately. Changes to accounting rules have allowed them enough breathing room to operate. Mortgage loan modifications have brought in fees. And trading activities have even helped some banks to boost profits.

Still, I believe there’s another banking shoe to drop.

As I reported yesterday, foreclosure sales are the majority of home sales these days. And when a bank sells a foreclosed home, it is a realized loss. That’s as opposed to a non-performing loan or a foreclosed home that has yet to be sold, which can be counted as an asset.

Further exacerbating this is that banks are not realizing as much profit on those sales of foreclosed homes as they’re all flooding the market with them and thus driving down prices.

So I expect to see higher losses affecting banks’ earnings in the future. These losses may not show up in the earnings season that’s about to begin, but they are looming.

*****It was reported today that mortgage applications fell 19% last week, another sign that foreclosures are driving the market. It also reinforces the point that once foreclosure sales slow, there may well be little demand for traditional home sales to pick up the slack.

Rising interest rates and still-falling home values are also impacting new mortgage applications. It’s a buyers market, and there’s no reason to rush in when prices are falling and loan costs are rising.

*****Bloomberg is reporting that 20 million of the 93 million homes, condos and co-ops in the U.S. are underwater as of March 31, 2009. Somebody will take these losses at some point, whether it’s the homeowner, the bank or the government/taxpayer or a combination of any or all of the three.

******We know that sub-prime mortgages were a major source of non-performing loans and foreclosures. Now, prime mortgages are in trouble. In his morning missive to his traders, TradeMaster Daily Stock Alerts’ Jason Cimpl had this to say:

Delinquencies on prime mortgages soared in the first quarter of this year. Delinquency rates on prime mortgages, the least risky category, were 661,914, a jump from 250,986 a year earlier. Two thirds of all mortgages in the U.S. are prime mortgages, so any percentage increase in delinquencies represents a huge absolute number of delinquent mortgages. Here is more proof that banks are in for a tough few years as they must monitor their loan portfolios even closer and suffer write-offs. If prime mortgages start going south in a big way, look for banks to stiffen lending standards even more. Either way, this will have a negative impact on their bottom line numbers

The evidence is building that the economy is nowhere near out of the woods. And we can also see that banks will be facing serious problems ahead. As I said yesterday, investors should be on their toes.

Also, we’re not recommending downside positions on banks – yet. But that time will come, and there will be a lot of money to be made.

*****I’m giving my staff the day off on Friday. There will be no Daily Profit that day. And I’ve cajoled Jason into giving us his video chart analysis tomorrow, so we have that to look forward to tomorrow…

If you can’t wait, check out Jason’s video from last week and get a special opportunity to try his TradeMaster service. Click here.

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. Earlier I mentioned I’m not recommending shorting any U.S. banks yet, but there is one bank you should have in your portfolio as a long position. It’s an Indian bank that is immune to U.S. mortgage exposure and has seen exponential growth—economic turndown or not. Find out more about this bank in my new India stocks report. Click this link to get a copy.

When an 18% Decline is Consider Good...

IanWyatt — Tue, 30 Jun 2009 16:12:00 GMT

Normal 0 MicrosoftInternetExplorer4

Your Daily Profit

June 30, 2009

*****Boring!

*****Home Prices

*****Earnings Season

Fellow Investor,

Talk about boring. On Monday, around 10:30 AM, the S&P 500 rose above 924. By 12:30 PM, it rose to 927.99. Ignore the first hour of trading (when the S&P 500 made a comparatively wild 8-point swing), and the S&P 500 was confined to a 4-point range for 5 ½ hours.

Days like this make watching paint dry sound exciting. And as I’m typing this note, it’s down about 1.3%.

And TradeMaster technical analyst Jason Cimpl tells me it could be like this all week as we head into a holiday weekend. If you want to catch a replay of his video that gives insights into this week’s market direction just visit HERE. (or go to trademasterstocks.com/videoreport)

Great. But that’s summer trading for you…

*****The Case-Shiller home price index, which measures home prices in 20 U.S. cities, showed that home prices fell 18.1% in April. And that was better than expected!

Of course, the index was only half a percentage point better, which most likely falls within the margin for error. Still, the results prompted the senior economist at Wachovia, Mark Vitner, to say “It is looking a bit better…[t]he largest declines are probably past.”

And David Blitzer, chairman of the S&P index committee said, “While one month’s data cannot determine if a turnaround has begun, it seems that some stabilization may be appearing in some of the regions…”

*****At first glance, these comments might seem a little, um, out of touch with reality. After all, how can anyone think that an 18% decline in home values is good?

The reason is that its foreclosure sales that are driving the Case-Shiller Index lower. Close to 5 million seized homes may be sold this year. To add some color, according to Bloomberg, 73% of all home and condo sales in Las Vegas in May were foreclosure re-sales.

73% -- that is an amazing number. And because these homes get sold at fire-sale prices, the affect on the overall housing market is dramatic.

*****That foreclosed homes are finding new owners is what’s prompting economists to say prices may be stabilizing. And once prices stabilize, then the erosion of household wealth stops. And, then, maybe consumer spending picks up.

At least that’s how the story goes...

There are some problems with this rosy scenario. Falling home and stock values claimed around $13.9 trillion in household wealth since 1997. That means there’s a long way to go just to get back to break even. But with unemployment expected to persist above 7% for the next couple of years, where is the buying pressure for homes and the earnings power for public companies going to come from?

It’s easy to imagine investors buying foreclosed property at discounted prices. But that doesn’t mean the same level of demand exists for regular home sales. In fact, I’d go so far as to say there’s no way demand for homes will be sustained beyond foreclosure sales.

*****Banks are taking losses as they clear bad mortgage loans from their books. That means banks will have room to make more loans – but will people want them?

Again, I suspect not.

That means banks will struggle to make up the losses and keep earnings growing. And with earnings season right around the corner (Alcoa (NYSE:AA) kicks earnings season off on July 7) investors should be on their toes.

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. A reader sent in an email yesterday asking about China and whether it’s a good time to get back in. After last year’s sell-off Chinese stocks are moving back up. If you missed the first China bull, this is your second chance. I’ve just finished a stock research report on 3 China-based stocks that every investor should have in his or her portfolio. Find out more HERE.

World Bank Calls for Greater Global Downturn

IanWyatt — Mon, 22 Jun 2009 17:07:00 GMT

Normal 0 MicrosoftInternetExplorer4

Your Daily Profit

June 22, 2009

*****Oil Prices Down

*****Economic Calendar

*****TradeMaster: Jason's Chart Analysis

Fellow investor,

Oil is down again this morning. The World Bank has lowered its growth projections for the global economy. In March, the World Bank was calling for a 1.7% contraction in global GDP. Now, it says the global economy will shrink by 2.7%. That's a pretty big revision.

The forecasts for China and India are about the only bright spots.

Traders are taking profits on oil stocks, which suggests they don't see a lot of upside for oil prices right now. Demand is still down, and we're not seeing a runaway economic recovery.

*****Here's your look ahead at the economic data for the week. Tomorrow, June 24, we get existing home sales.

We get new home sales on Wednesday as well as durable goods orders, oil inventories and the Fed will tell us that they aren't changing the overnight lending rate.

Durable goods orders will be a market mover. Last month, you'll recall, the number came in above expectations. Another strong reading would be great, but I have my doubts that it will happen. We should be expecting month to month swings in data like durable goods orders. It seems too early to establish a trend higher.

Thursday, we get initial jobless claims and the final First Quarter GDP number. The initial report is that the economy contracted at a 5.7% annualized rate. There may be an upward revision but I doubt that would be significant. Investors want to believe that the economy bottomed in the First Quarter, so this number gets a pass.

Finally on Friday, we get personal income and spending, the Michigan sentiment review.

*****Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, gave us his weekly forecast for the major indices on Friday. If you missed it, here's the LINK. Jason's forecast was near perfect last week. We'll see how he does this week.

*****We'll be discussing our bullish outlook for commodity stocks in next Wednesday's Video Conference. It's titled Inflation Busters: Discover the Stocks to Grow and Protect Your Wealth and will air on Wednesday, June 24 at 6 pm. It's free to attend, you can sign up HERE.

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I'll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

Bernanke Will Need to "Uncreate" Money

IanWyatt — Thu, 18 Jun 2009 14:49:00 GMT

Normal 0 MicrosoftInternetExplorer4

Your Daily Profit

June 18, 2009

*****Uncreating Money

*****New Buy Signal?

*****TradeMaster: Buying for a Bounce

Fellow Investor,

10 banks have paid back $68 billion in TARP loans. Including some smaller banks that have already repaid loans, the total is now over $70 billion. Even though the repaid money was raised from secondary stock offerings, which dilute shareholder value, it’s still something of a positive sign, I suppose.

Now, what’s going to happen to the money? Will it sit in the TARP fund? Will it be used to back other loans to small businesses?

This is an inflation issue. The money supply has increased by around $1 trillion in the last year (much of the bailout “funds” have been loan and asset guarantees that haven’t increased the money supply, yet). It’s the Fed’s job to contract the money supply to keep price inflation in check.

This is the problem with creating money – you have to be willing to “uncreate” it at some point. With unemployment as high as it is, inflation is not yet a concern. But that will change eventually, and the Fed will have to have the resolve to contract the money supply when the economy starts showing signs of life.

As we’ve seen in the past, an economy that gets hooked on liquidity is very hard to wean. I personally have my doubts as to whether this Fed will be able to avoid the Greenspan legacy of allowing asset bubbles to form. So we want to be ready to profit form whatever asset bubbles arise in the future.

This is one of the topics we’ll be discussing in next Wednesday’s Video Conference. It’s titled Inflation Busters: Discover the Stocks

to Grow and Protect Your Wealth and will air on Wednesday, June 24 at 6:00 P.M. It’s free to attend, you can sign up HERE

*****Stocks are trying to put an end to the sell-off that started with Monday’s big decline. The S&P 500 is within a few points of its 200-day moving average. It’s also less than 20 points from its 50-day moving average.

One of the simplest trend following systems focuses on the crossover of the 50-day and 200-day MA. When the 50-day MA crosses above the 200-day MA, it signals a trend change from bear to bull. When the 50-day MA falls below the 200-day MA, it signals a change from bull to bear.

So, the current trading is very significant to technical traders. The S&P 500 is flirting with a major buy signal. It should be noted that the Nasdaq flashed the moving average crossover buy signal a few days ago. I would view the moving average crossover on the S&P to be confirmation of the Nasdaq signal.

*****Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, isn’t waiting. He’s expecting a strong bounce and recommended 3 upside positions to his readers yesterday. One of them, the Direxion Technology Bull (NYSE:TYH), is a leveraged ETF that seeks triple the daily gains on the Russell 1000 Technology Index. That trade finished the day with a 3% gain.

Don’t forget the new Daily Profit feature – Jason will give us another video chart analysis session tomorrow. In last Friday’s edition he pretty much nailed this week’s trading so I can’t wait to see what he has to say about next week.

*****I’m itching to recommend a new stock to Daily Profit readers. We did pretty well with Graham Corp (AMEX:GHM) and Hovnanian (NYSE:HOV) earlier in this rally.

I can’t say I feel comfortable recommending Molecular Insight Pharmaceutical (Nasdaq:MIPI), but the story that came out yesterday is pretty darned interesting. The biotech announced that it can both detect and treat prostate cancer with its imaging agent, Trofex. And instead of the usual 5 tests including MRI and ultrasound, Molecular Insight can collect the necessary data for diagnosis within 2 hours of the Trofex injection.

The stock was up 42% to $6.24 yesterday. Of course, like most small biotechs, Molecular Insight is burning through cash like a teenager at the mall. But if this technology is viable, the stock will go a lot higher than $6.24.

Just thought you’d like to know…

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. Late yesterday I got a few emails from readers regarding alternative energy stocks. Specifically, they wanted to know if it’s time to get in. Absolutely. These stocks took off during last year’s oil run-up then got beat down in the crash. They’re moving again with oil’s ascent from its lows earlier this year. To find out more and get my alternative energy recommendations just click HERE or visit pro.SmallCapInvestor.com.

Investors Continue to Buy on the Rumor

IanWyatt — Mon, 15 Jun 2009 15:17:00 GMT

Normal 0 MicrosoftInternetExplorer4

Your Daily Profit

June 15, 2009

*****Summertime

*****Buy the Rumor

*****The Week Ahead

Fellow Investor,

Summer doesn’t officially start for a few more days. Tell that to the parents who are now getting their kids off to camp or getting ready for vacation. For the standard two-income household, living easy in summertime is just a memory.

Including today, we have just 12 more trading days until the end of June and the end of the second quarter. I suspect we will have seen the highs for stock prices by then. That is, if we haven’t seen them already.

Oil backed off recent highs on Friday. And that’s likely to continue. Oil was too cheap at $33 a barrel. But $73 is too high, at least for now while much of the developed world is still mired in an economic downturn. We know demand is still weak. And we know there are looming supply issues when demand picks back up. However, the issue right now is the economy.

*****Oil has been rallying as the news cycle has been relentlessly optimistic about an imminent economic recovery. In fact, many leading economists expect U.S. GDP to actually grow in the third quarter.

Investors have bought the rumor of economic recovery. We’ll see how they respond to the news. I’ll be watching oil as the leading indicator for economic expectations.

Right now, it seems like stock prices have priced in a modest recovery. And if investors perceive that there’s not much upside left for stock prices, it would makes sense to trim exposure, take profits, or however you want to put it.

*****We’ve seen anecdotal evidence that investors are moving funds out of the stocks that have led the market higher. Technology has been having trouble making headway. And we’ve seen strength in healthcare and consumer staple stocks. Plus, the Volatility Index (VIX), which measures the cost of put options (which rise in value as stocks or indices fall, thereby giving investors downside protection) has been on the rise.

This suggests that investors are preparing for a downside move for stock prices, or, at the very least, protecting gains they have made.

*****On Mondays, I’m going to start offering a look at the economic data coming out during the week ahead. This week is a bit unusual as all the economic data is out on Tuesday. Tomorrow we get Housing Starts, Building Permits and the Producer Price Index (PPI).

Of course, consumers will focus on the housing numbers. But I’d expect any numbers will be interpreted with optimism. Investors seem to understand that the bottoming process for the housing market will be volatile and that wild swings in the data should be expected.

In my opinion, the PPI is the one to watch. The U.S. dollar rallied a bit last week, but there’s no doubt that massive Treasury bond sales have investors worried about a weaker dollar the potential for inflation to pick up. Add to that improving retail sales numbers, helped by higher gasoline prices, and you have the potential for a higher-than-expected PPI reading. Needless to say, that would not be good for stocks.

*****As always, please write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

P.S. You’ll recall from Friday’s issue we start sharing charting analysis from TradeMaster’s technical analyst, Jason Cimpl. If you didn’t have a chance to catch, here’s the link. You’ll get his take on this week’s market direction. Since this is a new feature for Daily Profit I’d greatly appreciate receiving any feedback from you on it. Write me at editorial@247investor.com.

Russia Joins China in Push for New Global Currency to Replace the Dollar

IanWyatt — Wed, 03 Jun 2009 13:39:00 GMT

Normal 0 MicrosoftInternetExplorer4

Your Daily Profit

June 3, 2009

*****Global Currency

*****When Big Money Plays Defense

Fellow Investor,

Russia is grumbling. Seems they are not happy that rising debt, slow growth and record Treasury bond sales are dragging the U.S. dollar down. In fact, Russian president Medvedev is calling for some kind of global currency to replace the U.S dollar as the world’s reserve currency. (Sound familiar? Like he’s taking a page from the Chinese?)

In an interview with CNBC on Monday he said, “We need some kind of universal means of payment, which could create the basis of a future international financial system…”

Of course, this is a horrible idea. As one analyst put it, “It took decades for the euro to be established. I can only imagine how long it would take for the BRIC countries to put together a currency.”

*****It’s an investing truism that the financials always lead the stock market. Recall that it was bullish comments from Citigroup that kicked off this rally back in early march. And I’m sure nobody needs reminding that it was the financials that kicked off the worst bear market in 80 years.

When the S&P 500 and the Nasdaq blew through their 200-day moving averages on Monday, the financials were out in front. But today, even though the major indices finished with slight gains, many financials finished in the red.

American Express (NYSE:AXP) dropped nearly 5%. JP Morgan (NYSE:JPM) lost 4.46%. Wells Fargo (NYSE:WFC) lost 4% and Citigroup (NYSE:C) lost 4.88%.

Bank of America (NYSE:BAC) is about the only major financial stock to finish in the green, and that was a 1.7% gain. In fact, the Financials SPDR (AMEX:XLF) failed to make a new recovery high along with the Nasdaq and S&P 500.

So what gives? Why have the financials underperformed, and why were they weak today?

*****One clue comes from the Healthcare Select SPDR (AMEX:XLV). As you may know, healthcare stocks are considered defensive stocks. That’s because their revenues are seen as being stable as healthcare is a necessary, as opposed to discretionary, expense.

In difficult markets, institutional investors will park their money in healthcare stocks as a way to maintain exposure, but lower risk.

If we compare the Healthcare SPDR XLV to the Financial SPDR XLF, we see an interesting divergence starting on May 8. Healthcare has been trending up since that date. And the Financial SPDR has been trending down. To me, this looks like sector rotation.

It appears that institutional investors are moving money out of aggressive financial investments and into defensive healthcare stocks. When the institutional investors start playing defense, individual investors should pay attention.

*****Technical analyst for TradeMaster Daily Stock Alerts, Jason Cimpl, thinks the rally has about another week before we start seeing some downside. And for good measure, he recommended that his readers take their 29% profits on Fushi Copperweld (Nasdaq:FSIN). This trade took less than 3 weeks. Nice job, Jason.

Jason is still holding the two stocks you may have learned about from the TradeMaster video I included in yesterday’s Daily Profit. In case you entered either trade, you should know that Jason has recommended a stop loss for FXI at $35.15 and UNG at $12.60. If you missed the video, you can check it out HERE.

*****As you know, Wednesday is usually Newsletter Advisors Weekly. In the spirit of summer I’m giving my friends in the investment advisory world a break this week, so there won’t be any interview today. If it’s sunny and nice where you are, be sure to get out and enjoy the weather; before you know it, the dog days of summer will be upon us.

Feel free to write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

Market Extends Rally with Shipper Leading Small Caps

IanWyatt — Tue, 02 Jun 2009 18:31:00 GMT

Normal 0 MicrosoftInternetExplorer4

Your Daily Profit

June 2, 2009

*****The Sins of the Father

*****Lies and Statistics

*****TradeMaster Video

Fellow Investor,

Shippers keep showing up in the top small cap movers. Last week we saw FreeSeas (Nasdaq:FREE), Hornbeck Offshore Services (HOS), and Genco Shipping & Trading (NYSE:GNK) putting up big gains. Most economists peg this to the ridiculously low shipping rates from earlier this year and to the boom in commodities trade in emerging markets.

Today’s trading has another shipper leading the pack: TOP Ships, Inc (Nasdaq:TOPS). The Athens, Greece based firm is up 41.4% to $3.24 in today’s trading through press time (1:30 P.M. Eastern).

Look for other small cap shippers to “chart new territory” over the coming months as shipping rates increase and global trade gets back on track.

Another repeat for small cap gainers is Green Plains Renewable Energy (Nasdaq:GPRE). Green Plains gapped up yesterday from Friday’s close and returned a nice 13% one day gain for investors. It hit $9.38 a little after 11:30 A.M. (Eastern) before falling back to $7.78, a 24.9% gain since yesterday’s close.

(Special note: if you’re looking for how to profit from all the shippers putting up double digit returns, check out my new report HERE.)

Small cap losers for today include EXFO Electro-Optical Engineering (Nasdaq:EXFO), down 19.3%, on news of the recent quarter loss and guidance for the next quarter that revenues for Q3 2009 will come in below the forecasted range. Other decliners include Track Data (Nasdaq:TRACD) down 18%, NewStar Financial (Nasdaq:NEWS) down 15.3%, and Daktronics (Nasdaq:DAKT), maker of large screen displays and electronic scoreboards for stadiums and theaters down 14.1% on news of Q4 profits falling short of Street expectations and indications that any recovery will not be noticeable until 2011.

*****Perhaps you’ve heard the phrase “the sins of the father shall be visited on the son.” Well, here’s a case where that’s definitely not true:

Yesterday, The Travelers (NYSE:TRV) insurance took the place of its parent Citigroup (NYSE:C) on the Dow Industrials Average.

Reuters reports that in 2002, when Citigroup spun off The Travelers, former Citigroup CEO and founder Sandy Weil said he wanted to focus on “…important opportunities to invest our capital really on a global basis, in much more high-growth businesses."

Apparently that didn’t work out too well for Citigroup. The Travelers, on the other hand, is being hailed as an icon of financial stability. Oh, the irony.

*****The Federal Highway Administration said that the number of miles driven collectively by Americans dropped another 3.1 billion miles in March 2009 from a year earlier.

3.1 billion is a big number. So if Americans are driving 3 billion fewer miles a month, it means 36 billion fewer miles a year. Sounds like a huge drop in demand for oil, right?

Well, we’d have to know how many miles are driven a year to be sure. And the article reporting this data conveniently left the total out. That meant I had to do more work…

In perusing the Federal Highway Administration website, I actually couldn’t find the raw total miles for 2008. But I found the cumulative estimate made in December of 2008, so that will have to do. The number? 2.9 trillion miles!

Now that’s a huge number. (To put it in perspective that would be 15,591 out and return trips to our Sun—it would be like if you travel to and from the sun 42 times day. This is NOT a small number.) And 3.1 billion a month, or even 36 billion a year, kind of pales in comparison, doesn’t it?

*****I don’t mean to dismiss how much demand destruction has impacted oil prices. But like any market, the oil market clearly over-corrected when it sent oil prices to $33 a barrel.

Have oil traders over-reacted in the opposite direction with oil at $68 a barrel. Maybe. But then again, there’s a reason that oil traders are content to pay the lease rates on tankers to store unsold oil. They clearly believe they’ll get higher prices later: much higher prices.

*****I discovered yesterday afternoon that the TradeMaster video from technical analyst Jason Cimpl didn’t work quite right. So I’m going to make it up to you today by offering you Jason’s latest video masterpiece.

This video features the two latest trades Jason issued for his TradeMaster Daily Stock Alerts readers. The two positions featured in the video were just bought yesterday. I will follow them here in Daily Profit so you don’t miss Jason’s sell signal if you choose to enter either of these trades.

You can view the video HERE.

Feel free to write and share your thoughts and comments: editorial@247investor.com. I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

Indices Heading for New Highs or a Pull Back?

IanWyatt — Fri, 29 May 2009 14:45:00 GMT

Your Daily Profit

May 29, 2009

*****Stocks: Bullish or Bearish?

*****One of My Secret Weapons

*****The Trend is Your Friend

Fellow Investor,

The high close for the Nasdaq since the rally began was 1,763. Yesterday’s close was 1,751. For the S&P 500, the high close was 929 and it closed at 906 yesterday.

I mention these levels because they are what traders are watching. Some believe that, since the indices haven’t taken out prior highs, the recovery rally is overdone and that a sharp sell-off is coming. Others say the recession is ending, the economy is improving, and there’s more upside coming. To them, any weakness in stock prices is consolidation for the next move higher.

It should be remembered that the Nasdaq is still around 800 points, or 32% of its 2008 highs. The S&P 500 is 660 points, or 42% off its 2008 highs. So it’s not like the indices are anywhere near prior levels. Who’s to say what should be a decent target for a recovering stock market?

*****We can always check price-to-earnings ratios. (I’ll use numbers from the Wall St. Journal’s Market Data Center. This is one of my secret weapons, but, since I’m here to help, I’ll share the link so you can bookmark it -- http://online.wsj.com/mdc/public/page/marketsdata.html#calandeco )

For the S&P 500, the trailing P/E is 15, and the forward number, based on estimates, is 15.75. For the Nasdaq, the trailing P/E is 13 and the forward number is 18.

Neither index seems extended on a price-to-earnings basis.

Oil hit a new high at $65, and inventories in the U.S. have dropped 3 weeks running. Traders believe increased demand as a result of increased economic activity is coming sooner rather than later. And bond prices have been falling, which is what you expect to see when stocks offer a more attractive risk/reward scenario.

Of course, one could also say prices fall when traders know there is a virtually unlimited supply of Treasuries hitting the market as the government needs to raise a lot of cash.

But explaining away numbers can be a bad idea. Because when we do that, we’re letting our own bias creep in. That’s exactly what happened last year when the drumbeat of a coming crisis started. So many pundits explained the numbers away with rosy talk.

*****The unemployment rate is nearly at 9%. Most believe double digits are inevitable. And what’s worse, some are saying that high unemployment of 6%-7% may persist for years. But that doesn’t necessarily mean that corporate profits will get worse from where they are now. Perhaps the current P/E ratios for the Nasdaq and the S&P 500 are appropriate. Maybe there’s even some upside.

In my opinion, what’s worrisome is that the next shoe to drop is still the first shoe – banks. There’s no doubt that the rally for financials has come on the government’s dime (that would be your tax dollars and debt to be paid by your children and grandchildren, of course). Refinances, mortgage and consumer debt modifications, investment gains from TARP money – these are all one-off windfalls. They blew in, and they will very likely blow right back out. What then?

Bank of America (NYSE:BAC) currently has a forward P/E of 10. Compound annual growth for the next 5 years is 7.6%. BAC also has $225 billion more debt than cash. Quite frankly, I don’t see any upside to BAC. And that makes me worry about the downside.

*****As you know, I’ve pointed out moments where it looked as though stocks were about to head lower with comments like “cracks are showing” or “the news cycle is turning negative.” So far, no significant downside has occurred. Of course, that doesn’t mean it won’t.

Consumer confidence has been steadily rising, and stock prices show it. We’re also moving into the summer months, which are traditionally the worst months for stocks.

For now, the best advice is an observation – a trend is in place until it turns. There’s no reason to simply sell or take downside positions now. But keep your eye in things, apply stop losses to your positions and we’ll see what happens.

If you want to get a clearer idea of what’s going to be happening in the markets, be sure to check out TradeMaster’s Jason Cimpl sharing his thoughts on the SPX, which tracks the S&P 500. He’s calling for the near term for a bullish trend. You can view the video HERE (no registration or sign up required).

That’s it for today; I’ll talk to you tomorrow. As always, you can drop me a line at editorial@247investor.com.

Ian Wyatt

Editor

Daily Profit

Oil, the Economy, and Mortgages

IanWyatt — Wed, 27 May 2009 15:49:00 GMT

Your Daily Profit

May 27, 2009

*****Oil and the Economy

*****134% Gains

*****Newsletter Advisors Wednesday

Fellow Investor,

So I heard a radio ad this morning from a mortgage company. It might have been PNC, but don’t hold me to it. It was typical mortgage ad fodder: rates are as low as they will go, the housing market is heating up, prices will rise, oil is headed to $80 a barrel this summer…

Yeah, I did a double-take, too. What’s a mortgage company doing discussing oil prices? And more importantly, where are they getting their numbers from?

*****When oil topped $60 last week and backed off, many in the financial media started the “oil’s headed lower” drumbeat. Just yesterday, there was a Bloomberg article reporting that traders have loaded up on out-of-the-money put options on oil in expectation of a drop in prices.

I guess they hadn’t heard this mortgage ad yet.

But seriously, oil and economic recovery are one and the same. If you believe that the economy is recovering, then oil at $60 – or $80 – makes sense. And right now, investors are speaking pretty clearly about their expectations for the economy – oil quickly reversed that drop below $60 to post a new short-term high at $63.

*****The top-performing oil and gas stock in the SmallCapInvestor PRO portfolio is a domestic oil company with 25 million barrels in the ground. The company is pumping about 5 thousand barrels a day right now. At $60 a barrel, that’s $109 million in revenue. And the market cap for this stock is just $249 million.

This stock currently trades just below $6 a share, and SmallCapInvestor PRO members are up 134% since I first brought it to them less than 2 months ago. But I think it’s headed for at least $10 (the 52-week high is $17.67). You can still make over $4 a share in gains (or more) and get positioned for the next big winner from SmallCapInvestor PRO. We’ve posted 11 winners out of 12 recommendations so far this year. Click HERE for details.

*****I’m not sure how I managed to do it, but I’ve completely overlooked TradeMaster Daily Stock Alerts technical analyst Jason CIimpl for a Newsletter Advisors Wednesday spotlight. Today, I rectify that. Please enjoy the following interview with Jason, and thanks to the reader who alerted me of my oversight…

I’ll talk to you tomorrow.

Ian Wyatt

Editor

Daily Profit

This week’s NewsletterAdvisors.com Weekly features Jason Cimpl, my protégé with TradeMaster Daily Stock Alerts.

Jason Cimpl is the lead equities research and technical analyst for TradeMaster Daily Stock Alerts. Together, he and I work hand-in-hand on the trading strategies and profitable recommendations that traders are currently enjoying. As Jason will tell you, the service is not day trading, but it's not long term buy and hold either. We're looking for short term momentum opportunities on stocks as they go up and down. Jason's been finding quite a few recently and I wanted to take some time to dig deeper and share with you how he finds profitable trading opportunities.

1. You and I have been working closely for a while now on the recommendations for TradeMaster Daily Stock Alerts. Can you briefly explain what you look for when recommending stocks and ETFs for subscribers to take positions in?

It completely depends on the type of trade we are making. Lately, most of our trades have been intended to capitalize on short term investor sentiment.

These trades are usually only good for one week, possibly two (weeks). First we try to figure out the direction of the market. Once we believe we know where the market is heading we pick stocks from the indices that correlate strongly to the market’s direction. Financials have been one such industry lately that moves strongly in the direction of the market.

After we pick an industry we take a look at individual stocks that look attractive. If we cannot find individual stocks, then we put our money into an ETF to take advantage of the short term move. Lately we have been becoming more bearish on the market, so we have limited our trading from the long side.

2. We've seen a run-up in stocks since March 9 with no real positive fundamentals behind it. I mean, housing data, consumer confidence, unemployment...all the numbers are still pretty bad. What's going on?

Although the economic situation is atrocious, it may be not quite as bad as some people expected. I think we are seeing two things driving the market right now.

The first reason is the government stepped in significantly. They have taken bankruptcy off the table for the banks. This gave investors confidence to invest in the market.

And second, this confidence caused the public to take on more risk. More risk lead to the buying of equity holdings as well as corporate debt. As risk appetite increased, so did the price of the stocks. This rise in price led the shorts to quickly cover their positions. Thus, prices continued to go up. This cycle has lasted for almost three months.

3. A couple weeks ago you did a great charting video on Fushi Copperweld

(Nasdaq:FSIN) and showed where Fushi was pretty much flat for this year then started to take off. How's it doing now, where do you see Fushi heading, and where can readers check out the video and get the background information?

If you are a long term investor and have a moderate risk profile, Fushi is a great stock to invest. We usually will only hold a position for a month or two, at most, so we are looking for an exit on shares of Fushi right now.

So far the trade is working out exactly as we had hoped. We told investor to buy FSIN below $7 and look for shares to reach $9 within a few weeks. So far shares have reached $8.50.

Investors can access the video by going to the home page at www.TradeMasterStocks.com, there's a link to the video near the middle of the page or just click the chart image.

4. In TradeMaster Daily Stock Alerts you're calling for the next 30 days to be bullish, followed by a bearish 90 day trend and a bearish 18 month trend. Can you explain this?

The market is still strong. Despite a few high volume sell days, stocks continue to have an upward bias. This trend is certainly slowing down, but we do not think it is over. In the next few weeks, we suspect the market will attempt to make a new high.

After the market reaches a new high we believe it will fall dramatically. Our targets are the low 800’s on the SPX by the end of June.

5. Over the next several months to a year, what sectors do you see as having the most promise for investors?

Energy and technology will continue to offer investors the best reward. Look for companies with clean balance sheets in the small cap space for the biggest returns in 2009. Also, pay closer attention to revenue growth. Net income is an easy number to manipulate. Right now, companies are cutting costs, which is causing net income to rise.

This strategy cannot be kept for long. At some point demand for the services or products must grow. Costs cannot be cut forever. Without growth in revenue companies will not survive 2009.

If you want find out more about TradeMaster be sure to check out Jason’s latest on http://www.TradeMasterStocks.com.