August 2011

 

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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.

 

October Monthly Report

October 2010

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· The September rally is still on, and may be taking a breather before going higher

· Growth tech (AAPL, GOOG, BIDU, NFLX, AMZN) is hot

· QE2 may further devalue the US Dollar and raise the price of commodities

The rally which started on September 1^st proved to be very profitable as realized gains were made in SPY (SPDR S&P 500 ETF), QQQQ (Powershares QQQ Trust), GLD (SPDR gold trust ETF), and Silver Trust ETF (SLV). These positions were exited on 10/19 on abnormal drops in GLD and SLV, which also coincided market resistance. The NASDAQ, the leading index, completed the right side of a cup formation, and is likely may spend some time digesting gains, even pulling before possibly heading higher. With elections just around the corner, institutions will also be watching and waiting before committing further big money. The current rally is going strong with a low distribution day count and solid leadership.

Several interesting opportunities exist should the market continue to go higher. With QE2 as a backdrop, institutions seem to be favoring high growth tech: GOOG (Google Inc), AAPL(Apple Inc), BIDU(Baidu), NFLX (Netflix), AMZN (Amazon). GOOG (Google Inc) and AAPL(Apple Inc) are also near potential buy points.

BIDU (Baidu) and fellow Chinese internet competitor SINA (Sina Corp) both report strong earnings and growth as internet use in China continues to boom. BIDU (Baidu) recently broke out of a 3 weeks pattern, so would only be buyable on a pullback at round $110 or even better, a low volume pullback to it 20 day SMA at $80.06.

There was nothing wrong with AAPL(Apple Inc) earnings as the company posted its seventh straight quarter of sales acceleration and fourth quarter of triple digit earnings, so it was a rogue group of after hours traders who decided to take the stock down. At the open on the next day, the “big boys” in the institutions took advantage and bought it right back up. BIDU(Baidu), NFLX (Netflix), AMZN (Amazon) also experienced post earning cardiac drops; in spite of strong earnings reports, with each also recovering. AAPL(Apple Inc) is 2 weeks into a 3 weeks tight pattern. Note how volume has dropped, or dried up this week – another bullish characteristic.

Another example of volume drying up is GOOG (Google Inc). Especially after its huge gap up move, price action has been tight – as if it’s winding up to blast off again. GOOG (Google Inc) needs to pullback to form a proper handle.

UDN (POWERSHARES DB US DOLLAR BEARISH FUND) are plays on the theme that QE2 will further devalue the US dollar, which is just about in a free fall. As the Dollar fall, the price of commodities will raise for price adjustment. DBC just completed its 3 weeks tight pattern and is waiting for a breakout about $25.47. UDN (POWERSHARES DB US DOLLAR BEARISH FUND) is looking to break out of its Cup with Handle at $27.76. Be careful with any of these suggestions, this is not a normal market environment, and volatility has made investing extremely difficult.

 

The top 20 of the IBD 100 getting hit hard

Even as the indices closed mixed today, the IBD 100 took another blow. Especially the top 20 stocks of the IBD100, the cream of the crop, which took price hits on above average volume. On a positive note, the cloud computing leaders ARUN, BIDU, NTAP, VMW, FFIV are holding at 10 SMA and 20 SAM support levels, and GMCR really is the only leader to totally fall apart. Next week will be interesting…