February 24, 2011 Can Buy Me Love Only 38 Billion
Interesting way to end this day in the market. We were running around today so except for some weekly call action at the opening, we heard about how bad the day was going and we did get a couple of calls from folk who wanted my opinion (or shoulder to cry on). Oil corrected for two major reasons today. One of the reasons was well publicized and unconfirmed the other was not well publicized but much more relevant.
Goofy Gadahfi was apparently shot will loading his 757 with gobs of gold. That would be the unconfirmed news feature but it still sparked a bit of a recovery into the indexes. A little less sexy and exciting is the fact that OPEC has committed to extending oil supplies by up to 20% to take the pressure off of crisis pricing. Now you might ask why would OPEC want to keep a lid on pricing of their precious commodity. We could do ten minutes on that but will spare you. The answers involve the world finding new places to buy oil and even other alternative energy sources.
Now the title of the post today is stolen from the Beatle’s Can’t Buy Me Love. The Saudi Royal Family is being very proactive and actually buying the people’s love with a 38 billion dollar stimulus plan including a 15% pay increase for all government employees, low mortgages, extended unemployment support and just about everything the other countries of social unrest have asked for.
|38 Billion. Hell I've Spent almost 3 trillion and that didn't buy me love.|
Everything but political reform. My guess is this will keep the youth of SA happy, or keep their parent happy enough their will keep the kids in check.
At the end of the day we had the NASDAQ up and DOW and S&P Down. Did you see where the S&P closed today? 1,306, we called 1,312 this week looking for a two percent drop. We are going to be close. If Gadahfi is dead or gone, OPEC confirms its promise of stable supplies, no excitement in Kuwait or Saudi, no one reads the details of the durable goods order from today (Non-defense capital spending almost 7% down), no one reacts to the poor new home sales (we called that Monday night and by the way think that lower new home sales is a good things as there is 15 month inventories of homes out there already), and there are no huge surprises in the GDP figure tomorrow, we will see 1,312 on the S&P 500.
From the "Even I don’t know everything files":
We have been talking about distribution days as posted in the IBD everyday. While we follow the figures and have even spent some time trying to figure them out, tonight we actually went on line to the IBD website and found out what they actually mean by distribution days.
IBD keeps track of the volume and the direction of stock sales for more than 10,000 stocks. They track this criteria and apply an Accumulation/Distribution rating on each of these stocks. The ratings run from A+ to E- and it is an indicator of how much institutional monies are heading into the market or the individual stock.
All of that we got, but we could not easily determine, by looking at the daily charts, what a distribution or accumulation day actually was. We searched the IBD website and discovered they consider a day of “Distribution” as one where a market index (NASDAQ, DJIA, S&P 500) closes down more than .2% on increased volume from the previous day. They track these days and pay close attention to how many have occurred over the last 10 or so trading sessions. If there are 6 or more distribution days, be werry werry werry carefoe bunny wabbit. You can back test this theory and see if you sold your holdings everytime we had 6 distribution days, you would have avoided ALL of the carnage of the last three financial crisums. (Is that a word? I like it.)
Armed with that information, we went into the S & P Chart and found the 4 distribution day’s on the S & P 500 so you could actually see them. I really en getting geeky with this chart stuff. (Getting?)
There’s A Bad Sun On The Rise
If there was not enough to worry about already, with the Gadhafi Gold Rush, panic in the markets, and collective bargaining on the ropes, now we are hearing the solar cycle is about to scorch our way of life as we know it. In February there was a solar flare.
Think of it as a hurricane on the face of the sun, with ribbony shards of hydrogen tentacles lashing out in space. (Wow I wrote that. Pretty cool or in this case hot!) These tentacles come flying through space for hundreds of thousands of miles. When we get into a solar cycle (Think Los Ninios for Space) these disturbances can cause lost calls on cell phones (AT&T will have an excuse now), fry satellites, and if bad enough like the one in 1859, can actually conduct the disturbances through telegraph cables. In 1859 the solar flares were so bad that telegraph wires were fused together. (The aurora borealis was spectacular that year by the way.) But I Digress.
Anyway if you need something else to worry about, this could be a biggy. All of our GPS satellites would be rendered useless. That means one of readers will actually have to look around to find the nearest Starbucks versus using their iPhone App. Imagine not being able to use the internet? Your computers would be rendered useless. You would have 437 channel of snow on your cable TV. You will need a crow bar and a 9 millimeter to get money out of your ATM machine. But the worst part of this catastrophe would be, YOU WOULD NOT GET TO READ MY BLOG!
So when can you look forward to this? The estimates are anytime from mid March to the end of 2013.
PICK OF THE DAY
We have lookie loos on Stocktwits.com who are actually quoting the blog. Hilarious. I was following up on one of POTD on our watch list and checked it on Stocktwits.com and found our own blog mentioned as bullish source. Absolutely hilarious. Hope they read the disclaimer. Anyway we have gotten a couple of nice comments about the POTD segment. Unfortunately we can’t pull one out of the air everyday. We could, but we really do want to give you ideas that have some merit.
However, we do have one today. Before we give it up, it is worth noting that IBD did a column on why ROVI may have run out of steam. (We suggested shorting or putting ROVI on Monday.)
ISRG Intuitive Surgical, Inc., together with its subsidiaries, engages in the design, manufacture, and marketing of da Vinci surgical systems for use in urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its surgical systems consist of a surgeon's console, a patient-side cart, and a vision system.
Ok remember the trend is your friend so we would not suggest you run out and sell the farm to own this stock, BUT when we see what shakes out from all the turmoil in the middle east and lower Manhattan (Wall Street), this could be one to take a position on. The fundamentals are very nice. No bebt, impressive earnings and sales growth, gross margins and operating margins are very healthy, ROE is acceptable, and there is a little room between the current price and average target prices.
IBD is really liking this stock giving it a 94 rating and indicating its ACCUM/DIST rating at an A- meaning it has some of the big boys attentions. From the chart, that is a hard to see. It’s last break out came on Jan 21 and it has been patiently trading in a range for the last several sessions.
Here is our play on this POTD. Put it on a watch list and wait for the trend to become more our friend. Look for a nice high volume up day or two and then consider getting in. We think the sector and the stock has legs. WE DO NOT OWN. At $330ish a share, you might want to consider some slightly out of the money calls when the time is right. If we move on it we will let you know.
Last Call For Charity Stock Players.
It looks like we are at about a dozen players in the First Salve Lucrum Stock Charity Challenge. Please get your picks in to me by Sunday so I can get everyone in with Monday’s closing prices. We have three continents represented and we would love to have more. (Come on Peter, give us some Joburg flavor.) Now I know there are about 40 or so lookie loos out there reading this. If you want to play, just drop me a note at firstname.lastname@example.org and we will get you squared away. All you have to do is send me at least 5 stock picks but no more than 10, give an on your honor 20 dollar (or equivalent donation to your favorite charity). At the end of the year Devin and I will match all participants donations to the winner's charity of choice.