November 2011 Monthly Investment Report

• The market has been rallying since October 12
• Leadership is strengthening, a healthy sign for the market
• SPDR Gold Trust Shares (GLD) is the pick of the month

Figure 1. Finviz Leadership Heat Map

Figure 2 Nasdaq Channel breakout in October 12

After a couple months of wild choppiness, the market decided to break out of it’s channel (Figure 2) in early October. This started a rally which is continuing to show strength. While still a difficult market to buy stocks, leadership, the “fuel” for a continuing uptrend, is starting to emerge. As seen in Figure 1, the Finviz Leadership heat map now has 21 stocks this month, doubling September; a difficult month. In addition, the high number of light green ticker labels points strong price performance, or high octane fuel for a rally. November and December are usually good months for investing as institutions “window dress” their portfolios with the year’s biggest winners.

Figure 2 Pocket Pivots buys signals for SPDR Gold Trust Shares (GLD)

The November pick of the month is SPDR Gold Trust Shares (GLD) or DB Gold Double Long (DGP) depending on your risk tolerance. Pocket Pivot buy signals have work well in 2011, and the latest one triggered on 10/26. Look for GLD to possibly continue building the right side of its cup formation and possibly back to the $180-$185 level. Also consider iShares Silver Trust (SLV) and ProShares Ultra Silver (AGQ) as both also trigger pocket pivot buy signals.

Let the markets be your guide. Happy Investing!

 

Kevin Marder MarketWatch interview with Bill O’Neil

Investor’s Business Daily founder, Bill O’Neil is rarely interviewed, so it was a pleasant surprise to see a two part conversation on Kevin Marder’s Marketwatch column. Bill dispensed his usual pearls of investing wisdom; stick to the rules, work hard, be optimistic, cut losses at 8%. This is all the usually stuff which has kept thousands of CANSLIM investors out of trouble, especially during these volatile times. Bill also gives his take of the current market as well as stock ideas

 

October 2011 Monthly Report

October 2011

• Introducing the Finviz Leadership Stock Screen for stock ideas and a gauge of market health
• Market volatility continues, but this is typical for bear markets
• The Amazon Fire tablet; ipad threat and tablet game changer

Figure 1. September Finviz Leadership Stock Screen

This month, the Finviz Leadership Stock Screen is being introduced. This is a screen of the market’s leading fundamental and technical stocks and can serve as a guide for watchlist ideas and general market health. Market leadership is key to healthy bullish rallies, so the number of stocks making the screen, the better. Figure 1 shows resulting stock tickers in a 1 month performance heat map- green showing positive gains for the month, and red negative. Currently, only 10 stocks have made the screen, which is low and a warning to market weakness. Figure 2 confirms this as the major indices have zig zagged between support and resistance levels rather violently in September, with poor accumulation on strong price days- a sign of weak insititutional support.

Figure 2 Market slop and chop through September, with low accumulation on up days

The hot holiday item for this year will be the tablet, but don’t expect AAPL (Apple Corp) ipad or the numerous Google based Android offering (Samsung, LG, Coby, Sony, etc) to have stellar sales. They will have to move over for the new kid in town, after AMZN (Amazon.com Inc) game changing announcement of its $200 Kindle Fire. The $499 ipad and the $400+ Android tablets will now need to slash their prices to keep up with Amazon’s heavily subsidized tablet entry. The Fire is not about hardware, and about the company’s push into consumption services such as music, movies, apps, TV shows through $79/year Amazon Prime; not to mention books and shopping. All this equates to a seriuos threat to AAPL (Apple Corp) itunes and ipad.

Figure 3

AMZN (Amazon.com Inc) stock has held up well and bucked a downward market trend during the month of September, and completed an 8 week, cup with high handle formation. While a 33% price retrace from the cup’s low to the pivot may be deep, there are very good signs of accumulation throughout the formation, and especially on the right side of the pattern. This makes AMZN (Amazon.com Inc) the stock to watch for October, but invest cautiously in this wild and crazy market.

 

August 2011

 

For comments, questions, charts and diagrams referenced in this report, please visit www.leadershipstocks.com or send email to ibdinvestor@gmail.com.

Figure 1

The week of 7/25 was a brutal, with distribution, or institutional selling occurring on 4 out of 5 days. This capped off an ugly month of trading which whipsawed up and down, creating an almost perfect “M” pattern (Figure 1). It was just as crazy for leadership stocks as Baidu, Inc. (BIDU) and Amazon.com (AMZN), and Apple Corp (AAPL) were winners; while Netflix, Inc. (NFLX), Panera Bread (PNRA), and Illumina, Inc. (ILMN) were losers. The soap opera surrounding the on again, off again Debt-Ceiling Bill created a volatile, news driven market; making for a difficult investment climate.

Figure 2

One thing as not changed; the US, along with many other countries are way over their head in debt. Many also agree the economy here in the US is still deteriorating. Inflation continues to be a problem, as well as real estate and unemployment. This is why GLD (SPDR GOLD Trust) and SLV (iShares Silver Trust) are this month’s picks to watch. Buy points for GLD and SLV were posted on July 19^th on leadershipstocks.com and are up a little over 2%. GLD ran into 3 big distribution days in the past two weeks, so may be a bit underpressure. It is also extended from it’s $153.61 breakout, so a pullback may be just what it needs before continuing higher (Figure 2).

Figure 3

SLV (iShares Silver Trust) gave a pocket pivot but point on 7/12, an early entry to what appears to now be a building cup formation. Keep an eye as the price continues to climb up toward $48.35 (Figure 3), and a possible breakout to higher levels.

 

Gold and Silver still a buy

Gold and Silver signaled buys on 7/12 of last week, and if you still have not entered positions in these precious metals, it’s still not too late. The strength shown since their entry points suggests there is more room to run.

 

 

July 2011 Investment Report

July 2011

For comments, questions, charts and diagrams referenced in this report, please visit www.leadershipstocks.com or send email to ibdinvestor@gmail.com.

Figure 1

The markets spent the entire month of June in “Market In Correction”, as stated on the front page of Investor’s Business Daily. During this time, it’s usually best to stay on the sidelines and stay out of trouble. This turned out to be good advice as June proved to be a very difficult for investors as the markets nose dived for a couple weeks, then sputtered around before finally putting in a couple of good days to end the month. While the indices climbed impressively to regain the 50 day moving average, this should be taken with a grain of salt as June ends the first half of the year, when institutions typically window dress to their portfolios. June also marked the end of QE2, the second round of financial “Red Bull” to stimulate the economy, and the stock market. The price gains on below average volume shown on the NASDAQ chart (Figure 1) also confirms that there was little strength behind this move. The indices did manage to record gains for the first half of 2011, with the DOW leading the way at 7.23% and the NASDAQ, S&P500, and NYSE in the 4.5% – 5% range (Figure 2).

Figure 2

While the overall incices continue to throw head fakes, many leading stocks have reclaimed their 50 day moving average (Figure 3). At this point, it’s a wait a see game as recent gains have come on tepid volume and are not showing much bullish convistion. With July comes the end of QE2, and low expectations for this market to go higher; but the market does have a way of doing just the opposite of what the crowd thinks. For now, the best to remain cautious, enjoy summer, and let the markets provide the clues on which way it will go.

Figure 3

 

Why Groupon is different from other internet IPO’s–it’s making money

During the roaring do com boom, it was eyeballs and clicks, and the potential to make money which got investors excited. Internet coupon merchant Groupon is different- it has revenue! Although it has reported a quarterly loss for Q1 2011, it is on track to bring in over $2 billion this year. Groupon is also a game changer in the traditional paper coupon business in a few ways:

1. Huge discounts to get your attention.
2. A time limit to snatch it up so you’ll jump in.
3. A high-tech shine: You can present your Groupon on a cellphone.
4. Customers pay upfront.

 

June Investment Report

The Cinco de Mayo correction call by Investor’s Business Daily did hold to form as the major indices averaged a 2.5% loss for the month. The Nasdaq (Figure 1) is representive of the downward stair step action for May and what looks to be a dead cat bounce back to the 50 day moving average. It’s possible to see the Nasdaq rally up to the the 2825 level, but the weakness of recent price gains, along with overhead pressure, suggests that the market is headed lower.

Inspite of overall weakness, a few leading stocks have done well and should be watched closely. These are NFLX (Netflix,Inc), CMG (Chipolte Mexican Grill), AMZN (Amazon Corp), GMCR (Green Mountain Coffee Roasters).

Figure 1

June’s pick of the month is GLD (SPDR GOLD Trust). With all the attention turned to the rise and fall of silver, gold has been quietly building the right side of its cup formation and signalled a pocket pivot buy point on 5/22 (Figure 2). Global default worries continue to be a backdrop to demand. Fitch downgraded Greek debt again; and Jean-Claude Juncker, President of the ECB warned that an audit currently underway may reveal that the country may not be eligible to receive financial aid next year. Norway has already frozen its 235 million kroner ($42.6 million) aid package to Greece.

 

May Investment Report

May 2011

For comments, questions, charts and diagrams referenced in this report, please visit www.leadershipstocks.com or send email to ibdinvestor@gmail.com.

In a first ever post-Fed meeting press conference, Fed Chairman Ben Bernanke said QE II will continue to be supported after June. This news helped sparked the NASDAQ to move to a new new 10-year high, giving the March 29^th rally new life. AMZN (Amazon.com Inc), April’s stock of the month broke out to a new all time high of $196.71 on over 3 times its average volume. Inflation continues to creep in, and the Fed’s position that high energy and food prices are “transitory” will be tested. McDonald’s is set to raise prices for the second time this year. Procter & Gamble Co and Kimberly-Clark Corp will charge more for diapers, toilet paper and detergent; Colgate-Palmolive Co is raising toothpaste prices.

Figure 1

The real story for April was SLV (iShares Silver Trust) (Figure 1), which closed positive for 16 out of 20 of the month’s trading days. At this point, it is exhibiting technical topping signs and looks to be at in a climax stage of its run. Trading has advanced silver to its biggest daily gains of the year on 2 and 3 times normal volume. When a stock, or ETF in this case, becomes too crowded after a big run up, it’s usually time exit.

Figure 2

Historically, Gold and Silver trade in tandem. So, throughout the last 3 years of trading the two, buying and selling occurred at the same time. Since March, the trade of these two precious metals have decoupled (Figure 2). While Silver shot through the roof, Gold continued on a slow upward trajectory. So, while Silver looks toppy, Gold is still a buy, and is May’s pick of the month. Choose your comfort level with GLD (SPDR GOLD Trust) or the 2x leveraged UGL (Proshares Ultra Gold) (Figure 3). Both signalled a pocket pivot on April 27^th and could be bought here, or even better on a low volume pullback to the 10 day SMA, $79 for UGL (Proshares Ultra Gold) or $147.48 for GLD (SPDR GOLD Trust).

Figure 3

 

Why Gold will keep going up

Throughout history, precious metals such as gold, silver, and platinum have been considered safe long-term investments in times of financial or political crisis. Such investments also help preserve wealth and buying power unlike fiat currencies, or money declared by a government to be legal tender. We have been in a financial crisis since 2007 as seen by massive, worldwide government stimulus programs and the Federal Reserve in the U.S. Moreover, gold supply from mining decreased 2001 – 2008 (Figure 1), while demand more than tripled (Figure 2).

Figure 1

Figure 2

While supply and demand are factors influencing gold’s long term pricing trend, central banks influence shorter term price fluctuations. Leased gold, gold swaps, or selling gold from the central bank treasury vault are methods used to keep the price stabilized.

The worldwide financial crisis is the back drop to higher gold prices. Many, including myself, believe the crisis will get worse. Bill Gross of Pimco believes, “the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates.” Increasing demand and restricted supply will keep the long term price trend up. Even central governments, who now work feverishly to keep the price down, are becoming buyers as they see their fiat currencies devalue.