February Investment report

Feburary 2011

• The market rally which started in November is starting to show signs of weakness. Can it continue to go higher?
• Google already owns worldwide market of smart phones and aims to do the same for Tablets

The market has been since November of last year but looked a bit wobbly toward the end of January (see annotated chart of “NASAQ Composite Index”). This rally is the result of QE2, the second round of Quantitive Easing, or the Federal Reserve’s shot of monetary “Red Bull” to stimulate the economy. But for how long? The first signs of a market change may have occurred on 1/19 and 1/28 on high volume price drops. Many leading stocks have also fallen victim with ugly institutional selling as can be seen in the charts of GOOG (Google Corp), FFIV (F5 Networks Inc) , APKT (Acne Packet Inc), ARUN (Aruba Networks Inc). It’s also very possible that this market will recover and continue to trend higher- with its highly volitatle nature. Either way, play cautiously by setting stop losses at no more that 8%.

This year’s Consumer Electronics Show was rather ho hum. Bigger and brighter 3d TV’s, more internet connected DVD players, and tons of gadgets refreshed with megapixels and added refinements; standard stuff. Google introduced the “Honeycomb” operating system for tablets and its partners introduced dozens of new Android tablets with bigger screens and improved graphics processing. The combination of these will create a silky smooth interface iPad lovers now enjoy and a much improved user experience; at a lower cost point. Google has already taken a dent out of iPad and Windows netbooks sales, and may take over worldwide sales this year as it has in the smart market (See chart “Worldwide smart phone market”).

 

Bought Google on a Pocket Pivot Buy Point

 

October Monthly Report

October 2010

To view charts included in this report, or to receive interim investment and market suggestions and insights, please visit http://www.leadershipstocks.com.

· 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.

 

Ugly day on the markets, but is this rally doomed?

 

 

All the major indices took on a distribution day today and the IBD 100 fell 2.4%. The distribution day count is raising, but as seen in the NASDAQ and S&P500 charts, we stayed about key support levels.

 

The action on Google and Apple (and Baidu) was also constructive, and may have room to grow higher if this rally can hold.