Sector Analysis Can Help Your Trading

Today, I'm going to be looking at nine individual sectors and analyzing each one. I am going show you a quick and easy way to tell which sectors are trending and which ones are stuck in a trading range.

I will also be looking at the top three stocks in each of those sectors that are trending to the upside.

The sectors I will be analyzing are as follows: Continue reading "Sector Analysis Can Help Your Trading"

Here's A Couple Of Stocks I'm Looking At

Here's a couple of stocks I'm looking at that I think represent fairly low risk. I expect both of them to resume their downward trends as their technical picture is not a positive one longer-term. The first one is Citigroup, symbol C and the next stock is Hewlett-Packard, symbol HPQ.
So let's go right to the charts and see with the markets and telling us right now.
As always, we rely on our market proven Trade Triangle technology for catching the big moves.
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Asian stock markets mostly higher on Citi report

By JEREMIAH MARQUEZ
AP Business Writer

(AP:HONG KONG) Asian stocks were mostly higher Monday, with Hong Kong and South Korea's benchmarks up more than 2 percent, amid reports the U.S. government might take a larger stake in troubled banking giant Citigroup to ease the financial crisis.

Worries that major Western banks, crippled by growing losses from bad assets, might have to be nationalized sent markets sharply lower last week.

But investors seemed relieved to have some clarity about the fate of Citigroup after the Wall Street Journal, citing people familiar with the situation, said late Sunday that Citigroup Inc. is negotiating with authorities to increase the U.S. government's stake in the teetering lender to as much as 40 percent.

Executives would prefer to keep the government's stake closer to 25 percent, according to the Journal, which reported Citigroup made the proposal to regulators.

So far, President Barack Obama's financial rescue plans have met a lukewarm reception. But analysts say such a move could help restore confidence by finally bring a measure of stability to the hard hit financial sector, further boosting the chances for an economic recovery.

"People are taking it as a positive sign," said Francis Lun, general manager of Fulbright Securities Ltd. "It shows the government will not allow a major bank to fail again. They've learned their lesson with Lehman Brothers that the ramifications are so great, sometimes no amount of money can rebuild confidence."

Hong Kong's Hang Seng rose 291.26, or 2.3 percent, to 12,990.43 and South Korea's Kospi was up 25.39, or 2.4 percent, at 1091.22.

In mainland China, the Shanghai benchmark added 0.4 percent. Markets in Taiwan and the Philippines also edged higher.

In Japan, the Nikkei 225 stock average lost 29.12 points, 0.4 percent, to 7,387.26 as the yen strengthened against the dollar, thought recouped some its losses. Australian shares also fell.

U.S. futures were higher on the Citigroup report, suggesting Wall Street would recover at the open. Dow futures rose 67 points, or 0.9 percent, to 7,419 and S&P500 futures were up 7.8 points, or 1 percent, at 777.30.

Last Friday, continuing financial and economic worries sent the Dow Industrials down 100.28 points, or 1.3 percent, to 7,365.67 On Thursday, the Dow broke through its Nov. 20 low of 7,552.29, and closed at its lowest level since Oct. 9, 2002.

The Standard & Poor's 500 index on Friday fell 8.89, or 1.14 percent, to 770.05.

Oil prices were steady in Asian trade, with light, sweet crude for April delivery up 35 cents at $40.38 barrel. The contract edged down 15 cents to settle at $40.03 Friday.

In currencies, the dollar fell to 92.85 yen from 93.32 yen, while the euro strengthened to $1.2913 from $1.2825.

Major indexes fall more than 6 percent for week

Major indexes fall more than 6 percent for week

NEW YORK (AP) — Wall Street ended another terrible week Friday, leaving major indexes down more than 6 percent as investors worried that the recession will persist for at least the rest of the year and that government intervention will do little to hasten a recovery.

Investors shaved 100 points off the Dow Jones industrial average just a day after the market's best-known indicator dropped to its lowest level since the depths of the last bear market, in 2002. Stocks of struggling financial companies were among the hardest hit.

The Standard & Poor's 500 index, the barometer most closely watched by market pros, came close to its lowest point in nearly 12 years.

"Right now, more than a crisis in mortgages or in housing, we have a crisis in confidence. That is biggest problem in trying to analyze the current market," said James Stack, president of market research firm InvesTech Research in Whitefish, Mont. "You cannot analyze psychology."

Wall Street has been sinking lower as investors come to terms with the fact that the optimism behind a late-2008 rally was clearly unfounded. Companies' forecasts for this year, on top of a dismal series of fourth-quarter earnings reports, pounded home the reality that no one can determine when the recession will end.

"It was a market that was built on that hope, and what we're seeing now is an unwinding of that," said Todd Salamone, director of trading and vice president of research at Schaeffer's Investment Research in Cincinnati, of the rally from late November to early January.

The disappointment seen this week arose from the market's growing recognition that the Obama administration's multibillion-dollar stimulus and bailout programs are unlikely to turn the economy around anytime soon.

"There were a lot of people that were banking on Washington to get us out of this. I don't know if there is anything Washington can do," Salamone said. He said the global economy is going through the tedious process of reducing borrowing and working through bad debt — something government help can't speed up.

With the week erasing whatever shreds of hope the market had, there is virtually no chance of a rally on Wall Street. What the market might see is a blip upward — but blips tend to evaporate quickly.

That's what happened Friday. Stocks erased some of their losses after White House press secretary Robert Gibbs doused fears that the government would nationalize crippled banks. Investors who worried about seeing their shares wiped out by a government takeover welcomed the news, but it didn't ease broader concerns about the economy.

The Dow Jones industrials briefly went into positive territory, but quickly turned down again.

Salamone said investors had been too hopeful in late 2008 and at the start of this year that the new administration would be able to swiftly disentangle the economy.

The Dow industrials fell 100.28 points, or 1.3 percent, to 7,365.67 after earlier falling more than 215 points. On Thursday, the Dow broke through its Nov. 20 low of 7,552.29, and closed at its lowest level since Oct. 9, 2002.

The Dow's 6.2 percent slide for the week was its worst performance since the week ended Oct. 10, when it lost 18.2 percent.

The Standard & Poor's 500 index on Friday fell 8.89, or 1.14 percent, to 770.05. The benchmark most watched by traders came within less than 2 points of its Nov. 20 close of 752.44, which was its lowest since April 1997. It remains above its Nov. 21 trading low of 741.02.

The Nasdaq composite index fell 1.59, or 0.11 percent, to 1,441.23.

For the week, the S&P fell 6.9 percent, while the Nasdaq lost 6.1 percent.

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 8.12 billion shares as options contracts expired. Volume on Thursday came to 5.64 billion shares.

The Russell 2000 index of smaller companies fell 5.75, or 1.4 percent, to 410.96.

Other world indicators also fell sharply. Britain's FTSE 100 declined 3.2 percent, Germany's DAX index tumbled 4.8 percent, and France's CAC-40 fell 4.3 percent.

Shares of financial bellwethers Citigroup Inc. and Bank of America Corp. fell on worries the government will have to take control of them. Citigroup tumbled 22 percent, while Bank of America fell 3.6 percent. The stocks were down as much as 36 percent during the session.

The fears about the banks are hurting shareholders of those companies and dragging down the rest of the market because the broader economy can't function properly when banks are unable to lend at more normal levels.

"Financing is the blood which runs through our nation's veins. It's what keeps us alive," said Lawrence Creatura, a portfolio manager at Federated Clover Investment Advisors.

He said the talk of nationalizing banks only underscores the troubles with the economy.

"Things are clearly not normal. It's not healthy. The patient was on life support, and now what we're talking about getting out the paddle with respect to nationalization," Creatura said.

As investors dropped out of stocks, safer investments like Treasury debt and gold rose. The price of the benchmark 10-year Treasury note rose sharply, sending its yield down to 2.79 percent from 2.86 percent. The yield on the three-month T-bill, considered one of the safest investments, fell to 0.26 percent from 0.30 percent late Thursday.

Gold broke above $1,000, closing at $1,002.20 an ounce on the New York Mercantile Exchange.

Investors are looking desperately at any safe havens simply because the stock market, which rises and falls on investors' expectations for the future, sees only trouble ahead.

"There's still a big fear factor syndrome," said Michael Strauss, chief economist and market strategist at Commonfund. "There is a focus on what is happening here and now instead of six months to nine months from now."

___

The Dow Jones industrial average closed the week down 484.74, or 6.2 percent, at 7,365.67. The Standard & Poor's 500 index fell 56.79, or 6.9 percent, to 770.05. The Nasdaq composite index fell 93.13, or 6.1 percent, closing at 1,441.23.

The Russell 2000 index, which tracks the performance of small company stocks, declined 37.40, or 8.3 percent, to 410.96.

The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended at 7,802.27, down 583.47, or 6.96 percent, for the week. A year ago, the index was at 13,758.35.

Is now the time for a bear market rally?

I've been in contact and reading the blog Psychologyofthecall.com for a few months now and from what I've read they seem to be on top of a number of issues. I asked them to answer one question for me...Is now the time for a bear market rally? Here's their answer:

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The ongoing global financial crisis has made perma bears look like geniuses, yet the Psychology of the Call team (POTC) senses the imminent appearance of a bear market rally for four good reasons.

1) President elect Obama's first speech and chief of staff pick, Mr. Rom Emanuel, were very bearish for the market; we are confident both of those negativities will change soon. POTC believes Mr. Obama's goal in the coming days and weeks will be to do everything popular to be re-elected to a second term in just four short years. He understands that half of U.S. citizens are in some way affected by the mayhem of the recent sell off; Americans expect transparent leadership and policies now.

It's that second pivotal term where Presidents are more inclined to show their true colors, especially in terms of openly hell bent left or right policy. We remain confident and are prepared for a lag effect Thanksgiving Obama rally to begin this week, as his centrist appointments and policies begin leaking through hedge fund insiders. We are not waiting for New Year to enter long positions, as that seems to be the easiest and most ‘herdish’ trade today: we remain forward thinking contrarians and are going long the S&P emini contracts into Thursday's death spike.

We believe President elect Obama will appoint some Wall Street friendly names to his first administration, doing so to satisfy his political appetite to win that critical no holds barred second term in 2012.

Yet, if he chooses to select only hard line left wingers, the market will not rally. After witnessing the extremely well planned and hard fought victory, we would be shocked to see a concentrated (leftist) cabinet:. We are confident that will not occur.

2) The pressure from Warren Buffett on President elect Obama to call for a change in mark to market accounting from the SEC, or announce a huge infrastructure stimulus plan plays a factor in our short term bullish call as well.

Berkshire Hathaway just reported a horrible quarter, and even if Buffett is okay with paying higher taxes, we know he does not want to see his almost perfect legacy wither, wilt, and die in his waning years.
Other recent Buffett investments in Goldman Sachs (GS) and General Electric (GE) have underperformed as well, and both of those companies will survive this wickedly panicked market.

3) The financial sector could begin to stabilize as it shrinks. The S&P is heavily weighted with oversold financials.  Approximately 20% of the S&P value lies in financials, so be cautious. Regional banks could begin bouncing with 50%+ buy-out premiums. Rumors abound that Citigroup (C) is very close to bidding for a regional bank with government TARP money.
Story here

This would ignite a type of forest fire under financials, forcing many perma bears to cover their seemingly bullet proof short positions.

We will take advantage of what we view as monopoly money about to be used to boost stocks like Regions Financial (RF) and/or Suntrust Bank (STI).

4) Intel's (INTC) (see MarketClub's latest prediction here, ed note) report of lowering numbers after hours creates the perfect set-up for hedge funds to close or enter new positions before they step foot on Capital Hill, Thursday. Please remember these managers are either long, short, or in cash at this point, so we expect the INTC news to shake out the wounded, weak, and desperate long herd, and flush out the dynamic kings of cash, specifically Steven Cohen and Paul Jones: Story here

These managers are patiently waiting to take over your shares when your fear factor boils over Thursday, turning their greed gauge on auto pilot in search of inexpensive generals. Will you allow them that satisfaction?

Four examples of best-in-breed generals at these levels are: Apple (AAPL), America Movil (AMX), Chicago Mercantile Exchange (CME), and Google (GOOG).

POTC feels the S&P index could settle above 1,000 by Thanksgiving, and as the bear rally gains momentum from one or two other positive developments mentioned above, then 1,100 on the S&P could well be reached before we wish you a Happy New Year.

Psychologyofthecall.com