______________________________________________________________________________
Issue No. 24 – May 2, 2005
Prescott, Arizona Systems@WiserTrader.com
______________________________________________________________________________
1.0
Trading
To reduce research efforts,
try our low cost stock
and options advisories.
1.1
The Schizophrenic Market
Intraday swings in the DOW
are now about twice as wide as they were at the beginning of the year. Turbulent
markets result from a broad spectrum of reactions to prospects for consumer
spending, economic growth, earnings, inflation and interest rates. Refer to
Table 1. Reactions range from full bullishness to full bearishness. On any
given day, emphasis by the financial media can fall on any one or collection of
factors resulting in highly erratic market behavior from one day to the next.
As prices move up and down on alternate days, price extremes tend to decrease
causing stocks to trade in a narrower range. Stock prices that had been
trending up or down now show a tendency to revert to their mean. High
performing growth stocks pull back and poorly performing stocks show signs of
recovery. Hype and press releases rule the day. The net result is
uncertainty, which markets generally do not like. Therefore, the market slides
sideways with a slightly downward general bias.
Table 1
Recent Market
Sentiment
|
|
Bullish
|
|
Neutral
|
|
Bearish
|
|
Consumer Spending
|
|
|
X
|
|
|
|
Economic Growth
|
|
X
|
|
|
|
|
Earnings
|
X
|
|
|
|
|
|
Inflation
|
|
|
|
|
X
|
|
Interest Rates
|
|
|
|
X
|
|
While it might not bother
value investors that much, it is particularly troubling to trend followers who
rely on technical signals to tell them when to enter trades. Many false signals
arise in a market such as this.
© 2005 Desert Mountain Systems, LLC. Members of wisertrader.com are neither licensed
brokers nor licensed advisors. Trades discussed represent recommendations
made by the editor for the wisertrader.com portfolio. The newsletter and web
site are for information only and should not be considered as personal advice.
While it is believed that the posted information is factual, mistakes can be
made in transcription. Investors should trade stocks only after verifying all
information and consulting with a licensed broker or adviser. Desert Mountain Systems markets third party trading systems but has no other affiliation
with trading system companies.
Using a more conservative
template can often reduce the number of signals to a certain extent but it
cannot eliminate the effect that oscillations in the major averages are having
on individual stocks.
Technical position traders
can take a longer view but not in the sense that they need to try to predict
market behavior. Prediction and market timing are decidedly uncomfortable. Traders
can re-gauge their expectations by looking at less volatile instruments, such
as sector and industry exchange traded funds (ETF) and Standard
& Poor's Depositary Receipts (SPDR). While market mood swings
affect individual stocks from day to day, they have less of an effect on
sectors as a whole. While these funds are not completely immune to market
swings, they tend to maintain their trends a little better, as seen in Figure 1
for Sector SPDR’s.
FIGURE 1
Energy, the major exception, has
undergone recent 10% swings in the price of oil. Nothing has done exceptionally
well over the past month. Health Care, Financials, Consumer Staples and
Utilities have held up better than other sectors.
2.0 Market Analysis
Industry leadership in
Table 2 is listed from highest to lowest.
Table 2
Major Indices:
Dow Jones +0.3%
NASDAQ -0.5%
S&P500 Index +0.4%
Russell 2000 -1.7%
30 Year Bond 4.519%
10 Year Note 4.201%
Industry Leaders
For the Past Week:
Waste & Disposal Services
Aerospace & Defense
Forestry
Real Estate Investment Trusts
Consumer Finance
Computer Services
Soft Drinks
Fixed Line Telecommunications
Telecommunications
Financial Services
Industry Leaders
For the Past Month:
Internet
Water
Real Estate Investment Trusts
Soft Drinks
Electricity
Biotechnology
Medical Supplies
Pharmaceuticals & Biotech
Pharmaceuticals
Utilities
Crude Oil $49.72
Gold for the past 30 days:
USD +2.09%
CAD +6.03%
CHF +1.51%
GBP +0.31%
EUR +2.49%
JPY -0.49%
The markets are still choppy with major
averages going up and down on alternate days. About 40% of the S&P 500
reported earnings this week. The numbers were good. It now appears
that operating earnings for the S&P 500 in aggregate will be up about 13%
for the quarter. That is above the 12% expected as of last week, and up
from forecasts of just 8% at the start of the reporting season.
First quarter real GDP rose
3.1%. March durable goods orders dropped a surprising 2.8%. March
personal income and spending were up solidly, but the price deflator rose
0.3%. Overall, the data did nothing to alleviate the fears that economic
growth is slowing even while inflation is firming. Oil ended the week at
$49.72, down from $55.39 at the start of the week.
Employment is to be
reported on Friday and the Federal Reserve announces its stance on interest
rates on Tuesday.
The 5 day RSI for the DOW,
S&P500 and the NASDAQ are neutral. The 5 week RSI for S&P500 and DOW
are neutral and for the NASDAQ is oversold. Other sentiment indicators are
given in Table 3.
Table 3
VTO Report on Market
Sentiment Indicators
|
Sentiment Indicator
|
Value
|
Last Week
|
2 Weeks Ago
|
Complacent
|
Cautious
|
|
VIX
|
15.31
|
15.38
|
14.53
|
< 20
|
> 50
|
|
VXN
|
18.54
|
19.04
|
18.01
|
< 30
|
> 70
|
|
Put/Call Ratio
|
0.738
|
0.669
|
0.698
|
< 0.6
|
> 0.7
|
|
%Bulls - %Bears
|
14.3%
|
21.5%
|
17.2%
|
> 29
|
< 20
|
15 Day Free Trial
- NO CREDIT CARD REQUIRED -
3.0 Procedure
The following watch lists contain
stock candidates for consideration. They are not necessarily recommended
trades. The “Reference” is the date that a stock was added to the list. The “%
Change” is how the price has changed since a stock was added to the list. Stocks
that are down 10% or more after being listed are removed. The “% from Max” is
the last price relative to the maximum price reached after a stock was added to
the list. Stocks that are down 8% from their highs after being listed are
flagged in yellow. Stocks that are down 15% from their highs after being
listed are removed. More information on each of these filters is available on
the web site. Send me an email
if you need specific details of a filter.
Key
Companies that have
experienced net insider buying, within the past 6 months of 5% or more of issued
stock, are listed in Table 3A. CTRX and THLD declined more than 10% since
being listed and were removed.
Table 3A
Net Insider Buying
Stock Filter as of 04/30/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% from Max
|
|
ACAD
|
04/29/05
|
0.0%
|
ACADIA
Pharmaceuticals Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
0.0%
|
|
CNST
|
04/29/05
|
0.0%
|
Constar
International, Inc.
|
Basic
Materials
|
Containters
& Packaging
|
0.0%
|
|
FTD
|
04/08/05
|
-9.3%
|
FTD Group,
Inc.
|
Services
|
Retail
(Catalog & Mail Order)
|
-9.5%
|
|
FVRL
|
04/22/05
|
2.4%
|
Favrille,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
-4.9%
|
|
INHX
|
04/08/05
|
1.8%
|
Inhibitex,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
-3.9%
|
|
IPSU
|
04/08/05
|
-3.2%
|
Imperial
Sugar Company
|
Consumer Non-Cyclical
|
Food
Processing
|
-4.2%
|
|
IPXLE
|
04/29/05
|
0.0%
|
Impax
Laboratories Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
0.0%
|
|
ITMN
|
04/08/05
|
-1.8%
|
InterMune,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
-1.8%
|
|
MERCS
|
04/08/05
|
-7.8%
|
Mercer
International Inc.
|
Basic
Materials
|
Paper
& Paper Products
|
-7.8%
|
|
MWY
|
04/08/05
|
-9.8%
|
Midway
Games Inc.
|
Technology
|
Software
& Programming
|
-11.6%
|
|
OSHC
|
04/08/05
|
-3.8%
|
Ocean
Shore Holding Co.
|
Financial
|
S&Ls/Savings
Banks
|
-3.9%
|
|
TRCA
|
04/29/05
|
0.0%
|
Tercica,
Inc.
|
Health
Care
|
Biotechnology
& Drugs
|
0.0%
|
|
VSTA
|
04/08/05
|
-3.6%
|
VistaCare,
Inc.
|
Health
Care
|
Healthcare
Facilities
|
-7.6%
|
Companies with net cash
positions that comprise at least 40% of their share price are listed in Table
3B. INCX, SWIR and VNUS declined more than 10% since being listed and were
removed.
Table 3B
Capital Rich
Companies Filter as of 04/30/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% from Max
|
|
ACP
|
04/08/05
|
-1.5%
|
American
Real Estate Partners, L.P.
|
Services
|
Casinos
& Gaming
|
-2.7%
|
|
ADZA
|
04/08/05
|
6.3%
|
Adeza Biomedical
Corporation
|
Health
Care
|
Biotechnology
& Drugs
|
-1.5%
|
|
CDCO
|
04/22/05
|
-4.4%
|
COMDISCO
HLDG CO INC
|
Services
|
Rental
& Leasing
|
-4.4%
|
|
EXAR
|
04/29/05
|
0.0%
|
Exar
Corporation
|
Technology
|
Semiconductors
|
0.0%
|
|
FDRY
|
04/29/05
|
0.0%
|
Foundry
Networks, Inc.
|
Technology
|
Communications
Equipment
|
0.0%
|
|
NCTY
|
04/08/05
|
10.2%
|
The9
Limited
|
Services
|
Business
Services
|
0.0%
|
|
WSC
|
04/08/05
|
-0.5%
|
Wesco
Financial Corp.
|
Conglomerates
|
Conglomerates
|
-1.8%
|
|
WZEN
|
04/22/05
|
-2.5%
|
Webzen
Inc. (ADR)
|
Technology
|
Computer
Services
|
-4.3%
|
For the screen in
Table 3C, the number of selections is reduced by eliminating stocks having
P/E’s greater than 30. FPIC and KBH were unlisted due to price declines.
Table 3C
Growth Momentum Watch List as of 04/30/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% from Max
|
|
BDK
|
04/29/05
|
#DIV/0!
|
0
|
Consumer
Cyclical
|
Appliances
& Tools
|
0.0%
|
|
CRAI
|
03/18/05
|
2.4%
|
Charles
River Associates
Incorporated
|
Services
|
Business
Services
|
0.0%
|
|
OSK
|
03/12/05
|
-4.8%
|
0
|
Consumer
Cyclical
|
Auto &
Truck Manufacturers
|
-9.4%
|
|
PTRY
|
04/29/05
|
0.0%
|
The
Pantry, Inc.
|
Services
|
Retail
(Grocery)
|
0.0%
|
|
SFY
|
04/22/05
|
-6.7%
|
Swift
Energy Company
|
Energy
|
Oil &
Gas Operations
|
-10.0%
|
|
SYT
|
04/08/05
|
-3.0%
|
0
|
Basic
Materials
|
Chemical
Manufacturing
|
-4.3%
|
|
TDY
|
04/29/05
|
0.0%
|
Teledyne
Technologies Incorporated
|
Services
|
Business
Services
|
0.0%
|
|
UNH
|
04/15/05
|
1.3%
|
UnitedHealth
Group Inc.
|
Financial
|
Insurance
(Accident & Health)
|
0.0%
|
|
WOS
|
04/01/05
|
-4.9%
|
0
|
Capital
Goods
|
Misc.
Capital Goods
|
-7.9%
|
|
ZNT
|
04/15/05
|
6.6%
|
Zenith
National Insurance Corp.
|
Financial
|
Insurance
(Property & Casualty)
|
-1.2%
|
For the Peter Lynch screen
in Table 3D, the number of selections is reduced by eliminating stocks having
P/E’s greater than 30. GMK, MBT and PCU were removed due to price declines.
Table 3D
Peter Lynch Value Watch
List as of 04/30/05
|
Stock
|
Reference
|
% Chg
|
Company
|
Sector
|
Industry
|
% from Max
|
|
BLSC
|
04/22/05
|
0.5%
|
Bio-Logic
Systems Corp.
|
Health
Care
|
Medical
Equipment & Supplies
|
-2.0%
|
|
CAJ
|
01/31/05
|
-1.0%
|
Canon Inc.
(ADR)
|
Technology
|
Computer
Peripherals
|
-4.2%
|
|
CHL
|
03/18/05
|
5.3%
|
China Mobile (Hong Kong) Limited (ADR)
|
Services
|
Communications
Services
|
0.0%
|
|
CSLMF
|
12/13/04
|
2.6%
|
Consolidated
Mercantile (USA)
|
Basic
Materials
|
Containters
& Packaging
|
-3.4%
|
|
GGB
|
04/22/05
|
-0.1%
|