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.

 

A September to Remember

 

· A September rally taking the major indices into positive territory for the year

· Strong leadership: CRM, FFIV, AKAM, VMW

· Gold hits alltime highs, Silver hits new 30 year highs

· The US Dollar continuing its fall and growing concern over a US government credit downgrade… possibly even bankruptcy

· Oracle is this month’s stock to watch

 

What a month! After getting faked out multiple times in May and June, the market finally decided to get its act together and act more like its usual self. The September rally has taken the major indices into positive territory for the year, and has produced several leaders discussed in last month’s report. These are the cloud computing stocks Salesforce.com (CRM), F5 Networks (FFIV), Akamai Technologies (AKAM), and VMware Inc. (VMW), online video renter Netflix (NFLX), and precious metals GLD (SPDR gold trust ETF), Silver Trust ETF (SLV). At the point, the market, along with many leading stocks, have every right to rest, pullback, and possibly make its next move higher.

Since 1945, the US dollar served as the world’s reserve currency,which has given the greenback worldwide clout. But with a GDP of about $14 trillion and growing debt, this is likely to change. While the government reported US debt at $13.370 trillion, this did not include off-balance sheet items. Factoring this in, the Peter G Peterson Foundation and Dallas Federal Reserve came up with more likely estimates of $63 trillion and $100 trillion, respectively – a level the GDP simply can not support. This not only brings up the real possiblity of a credit downgrade for the US, but also backruptcy.

UDN (PowerShares DB US Dollar Bearish Fund) is the play on the falling dollar. The price gains on above average volume are cues of institutional accumulation as it forms the right side of its cup formation. For now, its best to wait until this formation complete before considering a purchase.

ORCL (Oracle Corp) is trading near a nine-year high and a 26.73 cup buy point after vaulting 8% on Sept. 17 following a strong quarterly report. The software giant is getting a boost from its acquisition of server maker Sun Microsystems, and announcements that it is looking to acquire chip makers. Oracle is following Apple’s model of creating custom hardware and software to create innovative products, and have the potential to become industry leaders in cloud computing and virtualization.